Growth muted but profitability still in sight
B2B likely to offer downside protection for now
Q3’22 expectations
We fine-tune our sales estimates on the back of a challenging macro backdrop for consumer-facing businesses. Our new Q3’22e ARR estimate is SEK 69.2m (18% y-o-y growth), and the corresponding sales estimate is SEK 16.5m (19% y-o-y growth). Considering that Litium’s client base consists partly of B2B businesses, we assess that Litium will fare better in the near-term relative to similar companies with a greater share of B2C exposure. We continue to estimate a positive EBITDA in Q3’22e of SEK 0.6m, which is SEK 0.3m lower than our previous estimate of SEK 0.9m.
Minor changes to both ARR and sales estimates
While e-commerce volumes are likely to suffer going forward, ARR will probably grow, but at a slightly more muted rate. Note that our topline estimate changes of ~1-2% carry close to a full impact on profitability estimates, which are low in absolute terms, and our EBIT estimates for ‘22e-‘23e are thus down 9% and 20%, respectively. For ‘24e, we anticipate a rebound in consumer-facing businesses, and therefore increase our ‘24e ARR growth estimate from 23% to 26%. This only raises our ‘24e sales estimate by ~1% and our EBIT estimate by ~2%, however.
Implied valuation
Currently, Litium is trading at f12m EV/sales of 1.9x vs. its three-year median of 2.8x, implying that it is trading ~30-35% below the historical median. Further, our new estimates imply ‘23e and ‘24e EV/sales multiples of 1.6x and 1.3x, respectively.
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