• We trim '25e-'27e ARR by 1-3% on continued macro weakness
• Volume-based revenue growth could pick up in H2'25e
• EV/ARR ~2x, '25e EV/EBITDA ~8x

What to look for in Q1'25e

For Q1, we expect reported ARR of ~SEK 74m and sales of SEK 19m. These figures imply y-o-y growth rates of ~5% and ~7%, respectively. We also anticipate EBITDA of ~SEK 5m, which corresponds to a margin of ~25%, and operating cash flow of ~SEK 5m. Given the linearity of the ARR growth and the large share of recurring, fixed revenues, it is unlikely that sales will be more volatile than history suggests. While volumes for B2C are likely to remain suppressed, we believe that the comps are sufficiently easy to warrant growth.

Estimate changes

We cut '25e-'27e ARR and EBITDA by 1-3% and 1%, respectively. While we maintain our view that Litium is relatively resilient due to its large share of fixed revenues, we trim some upside potential in our estimates related to client volume-based (variable revenue) growth that is mostly a function of economic conditions. While we believe that tariffs are likely to carry a low direct or indirect impact, we do not believe that this aids conditions for Litium's clients. We continue to deem volume-related tailwinds to potentially start in H2'25e, and maintain our view that the company's long-term prospects remain intact, as Litium is positioned to benefit from the growth of both its B2C and B2B clients.

Valuation

Our revised estimates imply that the company is trading at an EV/ARR multiple of ~2x and at a '25e EV/EBITDA of ~8x (or ~13x '25e EV/EBITDA excluding capitalised R&D), whereas Nordic IT services peers are trading at a '25e EV/EBITDA of ~14x.