Q2’20 details
Litium reported its Q2’20 figures today, which offered ARR of SEK 47m, +2.3% vs. ABGSCe, for a solid y-o-y growth of +22.4%, +2.7pp vs. ABGSCe, which is within Litium’s new financial target of growing ARR by 20-40% annually. Net sales were SEK 12m, -0.4% vs. ABGSCe, of which 96.7% were recurring, +1.4pp y-o-y. The gross margin, which has been known to fluctuate between quarters (an effect which will be mitigated as Litium grows) was strong at 74.0%, +2.0pp vs. ABGSCe. Litium also appears to have had good control over its operational costs during Q2, where Q2 opex amounted to SEK -16m, growing ~12% y-o-y, which was in line with our estimate as Litium expands its personnel base within sales and marketing, along with additional product development spending. Ultimately this yielded an EBITDA of SEK -2m, +45.2% vs. ABGSCe, and an EBIT of SEK -4m, +21.9% vs. ABGSCe.

Mixed COVID-19 impact, somewhat normalised in June
Litium reports that it experienced a severe impact on new order intake during April and June as COVID-19 spread throughout the globe. The impact did however decline somewhat during June, where customer demand recovered in certain segments. On a general level, Litium reports that their customers have experienced very strong digital sales during Q2, which contributes to Litium’s top-line through the volume driven part of the company’s business, and in the long-term management expects demand for its platform to increase due to COVID-19.

Final thoughts
Litium has been on a solid run so far this year, the share is up ~55% YTD, and we see several tailwinds for Litium going forward. 1) in June Litium entered into a global partnership with Columbus which will facilitate geographical expansion, 2) in March Litium raised SEK ~40m through a new share issue gaining new institutional owners and 3) COVID-19 have likely facilitated increased adoption of e-commerce amongst retailers in the long-term.

Link to the analysis