Lime Technologies AB (publ) (LIME) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Q4 update with Lime Technologies. My name is Tommas Davoust. I've been at Lime since 2017 and joined or started as CEO 1st of January this year. And with me, I have Anders.

Hello, everyone. My name is Anders. I've been at Lime since September 2024, and I'm CFO.

Fantastic. Feel free to write any questions in the chat, and we will try to answer them in the end of the session. If we look at the agenda, we'll start with an overview of Lime and the sum up of Q4 and 2025. We'll go into the order intake. We look at the revenue. We'll go through the profit, and we'll finish off with a summary. And let's start with an overview of Lime. We have always been running Lime with a long-term perspective, and that has left us with this fantastic footprint. In 25 years now, we have grown on average with 18%. We have had an average EBITA margin of 25%. And of course, that's something that we are really proud of. And I would say that the biggest reason why we have managed with this year after year is our people and our great corporate culture. And we know that in order to win in the competitive environment that we are playing in, we need to be a little bit better in everything we do. And we believe in creating a culture that is great at combining high performance with a lot of care. And no matter the times, good or bad, our goal has always been the same, to help companies become really, really good at sales and customer care so they can help their customers in a really good way in their customer journey. And as a supplier, we are strongest when we combine our software and our expertise so we can be a true partner to our customers. We have 2 revenue streams, the software and the licenses. And if you look at the software side, the ARR coming from that, it stands for 68% of our total revenue. And we have done this for many years now, starting in Sweden and scaling our business into several markets, now growing into Nordics; and since 2020, also entered the Netherlands; and 2021, in Germany. Now, we are present in 7 markets, 12 offices, and we have around 500 employees. Across our products, we have more than 7,500 customers and over 1 million users. And let me give you a sum up of Q4 and the full year of 2025. We delivered another quarter with profitable growth in a challenging market. Market conditions have been difficult for a couple of years now, and we entered 2025 believing it would improve during the year. We can conclude that it did not, not in a major way anyway. And in Q4, revenue growth amounted to 5%, EBITDA margin to 25% and our ARR growth to 7%. However, adjusted for currency, the ARR growth was 10%. And if we look at our overall revenue growth, it was held back by the services side. On the services side, we see that the revenues declined 3.9% in the quarter and 2.3% for the full year. But if we zoom in on the software side, that was 10% growth in Q4, 13% for the full year, showing that despite headwinds, we continue to have a competitive offering and grow faster than the market. And despite a modest sales growth, we increased our results per share, and our overall financial position allows us to increase dividend. The Board of Directors proposes a dividend of SEK 4.5 per share, which equals SEK 60 million and 54% of the net profit. If we go into the highlights, one that I want to point out is that we continue our expansion in Germany and the utility segment. We made another 2 deals. I will come back to them on the order intake. And we also made a smaller strategic acquisition of a portal solution with an established customer base in the German utility sector. This solution simplifies the process of connecting new customers to various utility networks, and that will further strengthen our position with both new and existing customers. Second bullet, in order to accelerate, I mean, our execution, we are clarifying mandates and growth agendas for all business units. Each unit is expected to meet the Rule of 40, meaning a combined growth and profit margin above 40%, some will prioritize growth acceleration, others margin expansion, but all should contribute to our overall value creation for customers and for the Lime Group. I'm also happy to welcome 2 new business unit directors: Lime -- Lukas in Lime Go, bringing strong sales expertise; and Hanna in Sportadmin with a deep experience in M&A and international expansion, both critical capabilities for our next phase of growth. And AI, and where many see AI as a threat to established software solution, we see it as a great opportunity. We have genuine competitive advantages that generic AI cannot replicate. If we take the combination of our software and the expertise, where we have the human touch, we have our vertical experience, we have a lot of compliance and regulations that we need to live up to. We have the data that is owned by the customer and that we can work with, and we have deep integrations. So with AI, we see that we can deliver more value faster, both internally and to our customer. And we are continuously working here to launch new value, new features, and they are met with really, really good interest. In Lime Connect, we released our own AI platform in November, and we've already closed around 40 deals there. We have introduced AI agents in Lime CRM. We have introduced AI-powered sales features in Lime Go. And I believe that 2026 is the year where AI is moving from investment to even more of a revenue driver. So going into the order intake. And if we look first of our customer concentration, you can see that, that is really low. Our top 10 customer stands for less than 7%, and our biggest customer stands for less than 1%. And we've also done some really nice deals in the quarter, and we can start with Lime CRM. We continue our streak in German utility, as I said, and 2 more customers joining. Iqony is our biggest deal of the year. And Langenfeld is another Stadtwerke, rather close to Cologne, where we have our office. In the real estate segment, we welcome CATENA and Heimstaden, who both will use our commercial real estate solution, helping them manage the leasing of commercial properties. The highlight in Lime Connect is that we've also gained some traction in the utility segment, and we have done 2 nice deals here, Stadtwerke Julich and Enpal. Enpal is actually one of the biggest deals ever done in Lime Connect. One deal to highlight in Lime Go is Wexman. They sell professional workwear. They have a sales team of around 10 persons and a lot of volume in the sales transaction. That is a really great customer profile for us in Lime Go. In Sportadmin, among many others, we welcome Falkenbergs and Vaxjo Vipers. And Vaxjo is a bit of extra fun for me since I've met them a lot of times playing floorball in younger days. All right. Moving on to revenue. So this slide shows revenue stream development since 2019. And starting back in 2015, we have completed several strategic transformations. First, moving new customers from upfront sales to subscription, later converting existing customers from service agreements to subscription. And subscription revenue is growing steadily. In Q4, we had a 12% growth for that. In the last 12 months, we have 15% growth. Service agreement is going down and now stands for only 2%. In total, the recurring revenue represents 68% of our total revenue, and that is up from 65% in Q4 last year, bringing us closer to our target of 70% subscription-based revenue. And as I said, Expert Services declined. And in Q4, we had minus 3.9% and minus 2.3% for the full year. This reflects 2 factors. One is the softer market condition that we have in professional service that we are seeing. And the other one is our own efficiency improvements. AI is helping us deliver implementations faster, of course, then reducing implementation time, making us more competitive. So services, they remain highly valued by our customers, and they really want us to help with holding their hands, with project management and so on. But when we can do technical deliveries faster, it allows us to drive more leverage through our software business. And if we look into 2026, I expect Expert Services to have a modest growth with services continuing to decline as a share of the total revenue in the long term, consistent with our strategy towards a shift with higher software share. And our revenue, as I've said, 5% in Q4, 8% over the last 12 months. If we break this down by geography, Sweden grew 2% in Q4, 6% the last 12 months; rest of Europe, 13% in Q4 and 12% last 12 months. As I said before, a modest growth overall, but strong performance in rest of Europe is really encouraging. It demonstrates that our vertical strategy and product offering resonates beyond Sweden, which is critical for our long-term growth ambitions. And with that, over to you, Anders.

Yes. Thank you, Tommas. Thank you, Tommas. So looking into the profit, the adjusted EBITA in the fourth quarter reached 25.3% compared to 25.8% for the same quarter last year. The EBITDA margin of 25.3% compared to an even stronger margin last year is explained by lower sales in Expert Services, partly offset by an increase in software-related revenues. Looking at the last 12 months figures, adjusted EBITDA amounted to SEK 184.9 million compared to SEK 172 million. Last 12 months adjusted EBITDA margin amounted to 25%, in line with our financial targets. And then going over to our OpEx development. Looking on the left-hand side first, personnel expenses in the quarter amounted to SEK 112.9 million, an increase of 7%. The increase is mainly due to higher number of employees compared to last year. Last 12 months, personnel expenses amounted to SEK 430.4 million, an increase of 9%. Adjusted for the acquisition of Plan Plan made in December 2024, personnel expenses increased by 8%. The increase in the last 12 months as for the quarter is explained by a higher number of employees. Cost per employee has remained stable, increasing broadly in line with inflation. Going forward, we will continue to invest in growth and talent, but at a slightly slower pace than the current increase. As the share of recurring revenue grows, we expect our cost base to develop more efficiently relative to revenue, strengthening our long-term margin profile. Then, on the right-hand side, we have our operating expenses. Operating expenses in the quarter amounted to SEK 34.9 million compared to SEK 32.4 million last year. Last 12 months figures amounted to SEK 133.7 million compared to SEK 120.2 million last year, corresponding to an increase of 11%. Adjusted for the acquisition, the increase was 10%. The increase both in the quarter and last 12 months is primarily driven by external product-related costs and growth-related items such as cloud and hosting services and product licenses as well as investments to support international expansion. Back to you, Tommas.

Yes. So turning to our financial targets. So as you know, by now, we have reached a growth of 8% over the last 12 months compared to the target of 18%. We have reached an EBITDA margin of 25% over the last 12 months, in line with our target. The net debt in relation to EBITDA is 0.6 compared to the target of being below 2.5. We increased the result per share. And for 2025, the Board of Directors proposes a dividend of SEK 4.5 per share, equals around SEK 60 million and 54% of our net profit, which is higher than the financial target of at least 50%. And to sum it up, Q4 closed a challenging but important year for us. We delivered profitable growth with a 25% EBITA margin. We won several strategic customers and deals with not least within our core verticals. We are not 100% satisfied with the growth rate in all our business areas, but we now have a really strong team. We have a clear focus and a good foundation to build on in 2026. And with that, we open up for some questions.

All right. So we have the first question here. Some lower software-related revenue growth in Q4. Do you think this is related to expert services and upselling or new sales? Do you still see new sales performing well? How was the beginning of Q1 started? So 2 questions.

Yes. But let's give you some flavor on that. Well, first and foremost, we had some currency effect as in the ARR, as I said, 7%, but 10% adjusted for currency. But -- I mean, we continue to have a rather stable, I would say, growth. If we look into our business units, Lime CRM continue to have solid growth, both on new sales and on existing customers. We're not 100% happy with -- if we look into Lime Connect, where we have been a little bit hit by AI that we have had with a third party before, our solution. We have changed that, as I mentioned, quickly as well in November to our own AI solution and AI platform. And as I said, 40 deals closed since November. So we're seeing a nice trend there. And if we look at Sportadmin, what in -- for last year, we also were hit by the criminal hacker attack and that has had some effect on us. And we see that we haven't been able to spend as much time on new customers, but we have spent and holding our hands of our existing customers. So in both wise, it also has some effect.

Okay. Perfect. So second question then, can you elaborate on how you're transforming Lime CRM with AI agents?

Yes, absolutely. So when it comes to the AI agents, we are really focusing on building something that gives a lot of value for our customers. So looking into specific processes that they are already working on, how can they make that even more efficient. So for example, say, in the ticketing and help us, when you get a ticket and if you can help them set up a solution that helps them summarize the ticket, suggest the category that you should place it in, suggest maybe an e-mail answer that, of course, makes things easier for our customers and gives a really hands-on value. And then, we try to -- we take it into our verticals to build vertical-specific solutions, and you can build up a lot of different value when it comes to the AI agents.

Perfect. Next question then, do you have any comments on the currency effect? It seems to have a fairly clear impact on the results. Yes, there was a currency effect in the quarter. Our sales growth, adjusted for currency impact, was 7%, that's 2% higher than reported sales. The euro is our biggest foreign currency amounting to about 20% of total revenue, followed by other currencies, I would say, around 10%. As a result, movements in the euro have the most significant translation impact on our reported figures. And then, next question we have, it reads, despite rather soft market conditions, you add more new employees this year in January compared to last. Why is that?

When it comes to recruitment, we always are investing in that to be able to grow long term. And when we dig into it, we, of course, also have people that are leaving us throughout the year. So the net though is not necessarily higher this year. We have -- don't have that many more employees going into this year compared to last year. And you can also see a shift in how we are focusing more to get on the sales side, as we've talked about as well to see a higher portion of the ones coming in to working on the sales side.

Okay. Good. So our next question, what's your view on the future of the seat-based pricing model? And how that fits into future where agents do a lot of work that was done manually before?

Yes. Good question. And we'll follow this for quite a few years, to be honest. And first and foremost, we have started to do some transformations. If we look into our verticals, for example, the real estate segment, instead of seat-based, we can offer solutions that is more based on the real estate number of houses that they have. And same when you look at membership, for example, instead of looking at seats, we can offer based on how many members do you work. So we are doing that. At the same time, we are actually looking into how it fluctuates here because we also see that we still have a lot of increase in seats. And in most segments, we have more increase in seats than what it actually takes us down. So we are watching this one closely and making changes over time and in a very strategic and proactive way, I would say.

Good question. All right. Let's see if we have another question. Yes. As new CEO, what's your main focus going forward? What will change with you as a leader?

Yes. I mean, I've been here for almost 10 years and a part of the management team for the past 6 years. And last, I've been responsible for Lime CRM, which stands for more than 70%. So having that said, I feel like I've really been a part of the strategy and what the choices we have done. But of course, there are a few things that I would like to focus on. And to highlight a few, as I mentioned, push out mandates and decisions and responsibility even more to our business units and also to our different countries, our different verticals and so forth. If we can do that, I believe we can run faster, we can be even more engaged and be closer to decisions. So that's one thing. Second one is to continue to really be the expert everywhere we can, continue with our verticalization, where we see we have a really nice traction. We see that our customers stay with us for a long time. We see that we have higher win rates and so on. So continue that journey. And then, we have also, I mean, the transformation. We talked about that today as well that where the software is growing as a part of the total revenue share. And first goal now is to take it up to 70%. And I believe that that's a natural development that we will see over time.

Okay. Perfect. So we have another question coming in. It reads, you made a small acquisition in January. What does the acquisition pipeline look like in 2026?

Yes. So we have a small team working with this. And we are meeting new prospects or possible acquisitions every week. So we have a continuous pipeline in this, and we have 2 main strategies. One is on the international expansion of Sportadmin. And as you know, with the Plan Plan is according to that strategy, where we entered the Netherlands in Sportadmin. And we continue to look for similar types of acquisitions around Europe. And the other one is for Lime CRM, when we are looking at different ways of completing our whole offering, making it even better and maybe more competitive. So we're looking into that, but we are not rushing. It needs to be the right fit. We, of course, need to find the right culture. We need to find the right product fit and the right valuation. So we're not rushing it, but definitely high on our agenda as well.

Okay. Perfect. So next question then, the privacy protection authority, IMY it is in this case, has imposed sanctions of SEK 6 million on Sportadmin following the last year's cyber attack. How does this affect the organization, is the first one? And the second question in this is, how are customers reacting?

Yes. I mean, as I think most know, we were attacked by a criminal network here around a year ago. And first and foremost, we are really sorry for everyone affected, both our employees and our customers. And as you said, we reached -- or got an imposed sanction. And we do not agree with the IMY's decision, and we are currently investigating whether we will appeal or not. IT security has always been high on the agenda for us, both now and then. And despite that, they did manage to reach into our systems. So at an even higher pace, we have implemented necessary changes, and I mean, now stand stronger than ever. And if you take, as you said, internally as well, of course, this has been something that we have focused on a lot, really holding our customers' hand during the year. And that has taken a focus and energy from everyone involved. But I think we're all looking forward to really turn the table, so to say, and look forward.

Okay. I think we have one more question in the chart here. So you have a clear goal to become more international. Could you comment on the split between Sweden and rest of Europe?

Yes, sure. So I mean, first and foremost, all markets that we go into, we know we've done that organically more or less on the CRM side, and then, we have had a few more outside of Sweden in the end. But all markets should help us grow in the next 5 to 10 years when we go in there. And when we have done it, we've done it better and better for each market. If we take from standing from point zero, so to say. And our goal is to be market leaders in each different markets that we go into for our specific verticals. And we have been better and better to go in more focused. So -- I mean, with the latest now, the traction that we see in Germany, I think, is a really, really good example of this. We really said from the beginning, let's focus on the utility segment, and it has taken time, but it has really paid off. And now, we are really someone who is taking ground on that market. If we look at the other one, just some more flavor. Norway, also good traction, both in the utility sector and in the wholesale. Finland has had a tough market for some years, but we have seen a little bit better trends in the last period. And actually, we also had a quite stable growth. We are not happy with the Netherlands and Denmark, where we can accelerate the growth from where we are and looking into being more specific in our verticals there.

All right. Perfect.

That was it. Fantastic. So if you haven't seen it yet, then we have a Capital Market Day coming up, 4th of March. And really hope that if you haven't already registered, please do so. And hopefully, we can meet there. And -- yes.

Yes. With that, we would like to say thank you for listening in. And please touch base if you have any further questions to either Tommas or myself. And that's all.

Perfect, as always, don't hesitate to contact us if you have any things that you want to discuss further. Have a fantastic day, everyone.