• Sales and ARR in line with ABGSCe
• Limited consensus estimate revisions are likely
• Strong margin due to solid cost control

Q3'24 report

Litium reported an ARR of SEK 71.4m (+1% vs. ABGSCe 71.0m), net sales of SEK 16.7m (-2% vs. ABGSCe 17.0m) and EBITDA of SEK 4.3m (+29% vs. ABGSCe 3.3m). Overall, the report was broadly in line with our estimates, except for EBITDA, which was better than expected.

Thoughts and outlook

Litium continues to benefit from its relatively fixed revenue base and appears to not display meaningful net churn (i.e., customer additions and upselling less churn). It appears that business momentum is improving and that the company's pipeline is strong. While new business drives fixed revenues, we believe that the operating upside lies in an improvement in the variable revenues, which are driven by client volumes, which in turn are driven by better macroeconomic conditions for clients. Cash flow was strong and that lends us additional confidence in the company achieving its targets. In summary, our view of the company's operating characteristics remain unchanged but positive.

Cons. estimate revisions and valuation

Based on the first impressions from the report, we anticipate consensus to make positive, low single-digit ’24e-‘26e estimate revisions with respect to EBITDA. The company is trading at an EV/ARR of 1.8x based on reported figures. Litium will host a webcast today at 11:00 CET to present the Q3 report and to conduct a Q&A session.