Good morning, everyone, and welcome to Lime Technologies to Q2 update. My name is Nils Olsson. Been working at Lime since 2006 and running as CEO the past two years. With me today, I have our CFO.
Hi, I'm Maria Wester. I joined Lime in November of last year, so I've been here for eight months now. Feel free to write any questions in the chat, and we will answer them in the end of the session.
Perfect. Thanks for that, Maria. Before we jump into the Q2, let me give you an bit of an overview of Lime. For you, that has been following Lime for a while now, know that we always been running Lime with a very long-term perspective, and that has left us with a fantastic footprint, as you can see. In more than 20 years, we have grown. We have grown in average 19% per year with an EBITDA margin of 25% in average per year. I think that's something to be really, really proud about.
No matter how big we've been, how many customers we had, how many markets we have attended, I think we always more or less have had the same mission, and that is to help our customers to become really, really strong in sales, in customer care, so they can help their customers in a good way. We do that by delivering really, really strong software combined with expertise. Over the years, we have scaled our business, step by step. In 2020, we opened up our office in Netherlands. In 2021, we opened up our German office and also welcomed Userlike to the Lime Group. Today, we have offices in 10 different locations, in six countries, and we are around 400 employees.
If we look at our customer base, we have today a bit over 6,500 customers and, on average, around 80,000 users. If we look at some of our key success factors over the years, I would say, talking as I started with long-term profitable growth, combining that, for many, many years. I think we have a very sustainable business model. Today, 61% is recurring revenue, and we are not depending on one customer. We are doing deals with many customers every month, and our customer concentration is low, so the top 10 customers stands for less, for around 6%. Maybe one of the most important part is the strong corporate culture, where we really put in energy to build a value-driven organization that has a big focus on our customers.
Before we jump into the numbers, let me give you a little bit of overview of the Q2. I would say that we deliver a strong quarter where we continue to deliver profitable growth, still in a tough market. Revenue growth, 17%, EBITDA margin, 26%, and the ARR growth, 18%. Looking in the quarter, I'm also happy to see that we continue to be an attractive employer. We have a low employee churn, rolling 12 months, 6%, and we have approximately recruited 50 new employees so far this year.
If we look in a bit into Q2, in this type of business climate, I would say that CRM plays an even more important role for companies to both find smarter and more efficient ways to attract new, but also to retain existing customers. As I started with, our mission has always been to help companies to become really good in sales and customer care, so they can help their customers in a good way. We do that by being a local CRM expert. We can stay close to our customers at all stages, and we can help them succeed with really business-critical processes. Combining software with the expertise, that's when we really create value.
I would say this allows us to continue to gain market shares, even as companies, I would say, in this climate, become more, a little bit more cautious about investing, but also when we see that the competition intensifies. Looking at the order intake, we still see a little bit longer sales processes, as we discussed also in the Q1 call. During the second quarter, I would say still that we see a very strong order intake. I'm happy to see that we have an improved ARR growth and also that our consulting business, Expert Services, continue to grow in a really good pace.
One thing that we also been talking about is I'm happy to see gradual improvements in our German business area, Userlike, where we in the quarter both see a little bit improvement in both new sales and upselling, that they both are moving in the right direction. Looking at all these combined, I think this really shows that we have a sustainable business model that works both in good times, but as for now, also in a tougher business climate. If we look at, if we look at the order intake a little bit, and dig a little bit deeper into that, we have a focus on our verticals. In line with our strategy, we have won several large contracts in those selected industries in the quarter.
To pinpoint some, I would say, utility and the real estate vertical. What we do there is the combination of custom software and value-generating expertise in those industries really helps us to make complex processes simpler. We also put a bit of, like, customer focus for the entire organization. Since we've done this year after year and really have a good solution in those verticals, we can deliver cost and time-efficient solutions, and of course, that helps us to win more deals. It also, I would say, build barriers against our competitors. In the long run, of course, we are there to get really satisfied long-term customers.
Talking a bit about internationalization, as we mentioned several times, our goal is to become a more international company, and we are working hard to improve the growth in the rest of Europe. I mean, in the quarter, we have won several good deals, but still, I feel that we are not really where we can be, actually. Today, we deliver a growth of 20%, and we expect and want to have a higher pace in that area. We are working hard now with our go-to-market strategy, and I hope to see that we can see gradual improvements throughout the fall.
Culture, I think that this is actually one of the really key success factors, and I believe that a strong culture is key to long-term, profitable growth. It has been a part of our DNA for over 20 years. Therefore, we always need to continue to invest in our culture. Looking specific in this quarter, we launched our second share saving program. I'm happy to see that we had more than 150 participants. We have done a lot of recruits, and in August, a new onboarding program will start in Lund, and that's participants from all departments and all markets. We launched in the beginning of the year, a leadership program, we will continue to invest in leadership throughout the fall going forward as well.
Looking at the agenda, we go a little bit into the order intake, the revenue, profit, and then we sum it up with our financial targets. Of course, in the end, we have a couple of questions, hopefully. Looking at the order intake, as I started with, we have a low customer concentration. Today, our top 10 customers stands for 6%, and as you can see, our biggest customer stands for 1.2% of our revenue. Going in and being in a little bit tougher market conditions, I think this is very good for us. We are not depending on one customer. We are doing deals with many customers, month after month.
As I started with, we had a strong order intake in Q2, and we have won several deals within our focus industries. I think it's really cool that we can welcome Växjö Energi, Trollhättan Energi, and also the Norwegian utility company, Vattenfall. In the real estate sector, we have Poseidon, we have Svenska Hus, among others, and that they have decided to go with Lime as their CRM system. Another interesting area that is growing quite rapidly is member organizations. In this quarter, we can welcome Ruter Dam and Läkarmissionen. I think going forward, this will be an interesting vertical to look into a little bit more in-depth.
Looking at the revenue, we start with our ARR, and as a product company, of course, it's important to look into the development of the ARR. We can see that our subscription part of the ARR is growing by 23% compared to Q2 2022. Looking at the service agreement, a little bit more dark gray, there you can see a decrease of 20%. I would say that this is in line and what we have communicated before, that we have a project that we are running now, that we are transforming our own customer base, going from the upfront model into a subscription model. So that's something, and that's a project that will continue, I would say, until 2025, 2026, at least.
In total, this builds up an ARR growth of 18%, which I think is a strong number. Looking at our different revenue streams, we can see on the left-hand side, you can see the development since 2016, and I would say that our subscription steadily is growing 20% in Q2. If you also look, 20% in the last 12 months, and today it stands for 54% of our revenue. You can see that the service agreement is on a quite flat level, stands for 7%. As I mentioned just before, that we transformed the customer base now into subscription. Looking at that, it means that we have 61% recurring revenue.
Upfront is more or less less than 1% today. On the Expert Services level, which I've said that has had a good pace in both Q1 and Q2, is growing 17% in Q2 and stands today for 38% of the revenue. I, it's an important revenue stream for us, so it will continue to grow, but in the long run, decrease as a part of the total net sales. From a revenue perspective, we can look at the growth. We have 17% in Q2, and the last 12 months, we have 20% growth. Also looking then at the split. I've been commenting this a little bit earlier.
We have see Sweden is growing by 15, which is, I would say, a good number, and the rest of Europe by 20%. Looking at a little bit on the, on the right-hand side, you can see the last 12 months, we have, 17% in Sweden, and in the rest of Europe, we see 25%. Going forward, a big focus for us is to, of course, continue to grow the business in Sweden, but to put a little bit extra focus on the international markets, so we can have a little bit higher pace, going forward. We go into the profit, Maria.
Yes. EBITDA in the first quarter reached 26%, which is in line with the same quarter as the year before. Looking at the latest 12 months, Q2 2023 is at 25.5%, compared to 26%. The reasoning is that the latest 12 months for Q2 2022 is affected by the pandemic, with lower travel expenses, physical sale activities, and employee activities. On the right-hand side, we have the latest 12 months EBITDA development. As you can see, we reached a higher EBITDA margin of around 29% during the pandemic. We are back to a more normal and lasting level to support our future growth, investing in sales, marketing, staff, our products, and so forth. The last 12 months in Q2 2023, we have reached an EBITDA of 26%, as we are now able to invest more in future growth.
Since we have a good growth in the revenues, we have a positive underlying pressure on the EBITDA margin. As we have already communicated, we will continue to prioritize long-term growth over short-term profitability. Looking at the OPEX development, on the left-hand side, we have our personnel expenses. That is the largest expense in our profit and loss. Looking at the personnel expenses in relation to the net sales, the latest 12 months in Q2 2023 is at 57%, compared with 54% in Q2 2022. The increase in our personnel expenses is explained by that we have invested more in our employee activities, staffing, and compensation and benefits. The investment in our employees is contributing to a lower churn and better pace, especially in Expert Services, compared with pre-pre-previous period. On the right-hand side, we have our operating expenses.
As you can see, we have other operating expenses decreased by 1% in the quarter and increased by 14% in the last 12 months. The increase during the last 12 months is due to that we are investing more in future growth by marketing, physical sale events, and product development than we could during 2021 due to the pandemic.
Thank you, Maria. To sum it up, let's look at our financial targets. If we look at the last 12 months, we have a growth, 20%, and the target of growth is that we should be above 18% total growth. If we look at the EBITDA margin, we deliver at 26% EBITDA margin the last 12 months, with a goal of having above 25%. If you look at the capital structure, EBITDA should be less than 2.5, and today we are at a level of 0.8. If you look at the dividend policy, that the dividend is expected to correspond at least 50% of the net profit, and in 2022, we ended up at 55%.
Let's see if there is any questions popping up here.
Yeah, we have a question, Nils.
Yes.
What is your expectations, on the market going forward?
Well, I think that, looking at the market situation, it is a little bit turbulent, of course, with all the macro, that is happening. I expect more or less the same kind of market situation that, we've had now, the first, two quarters of 2023. That's what we are preparing for from an organization, and meaning that in a market situation like this, nothing more or less come for free. It's always that you need to find improvements. How can we do our sales process better? How can we get more, from a product point of view? How can we get more features and functions out to the market, faster?
It more or less that we are working with incremental improvements all the time, and we need to be on our toes for Q3 and Q4.
That sounds good. What's your expectations on the order level going forward? Could you share a bit about that?
I think that, I mean, we saw a strong order intake in Q2, which I'm very happy about. I mean, looking at the second quarter, we saw a little bit not a that good order intake in April, and then May and June turned out to be, I would say, much stronger, which I'm very happy about. Of course, we are, we have been doing a lot of sales activities now during the spring, so let's see if we can convert those into, to orders going forward.
What does your prospect say? What is stopping them from using Lime as a CRM system?
I think, I think what's stopping them from using, I think it's more that, there are many, many systems out on the market. I think especially from our point of view, we believe that we believe in verticalization and to be really, really strong in certain verticals. Looking at, looking at our, we are focusing on four verticals. We have the utility, real estate, wholesale, and consultancy, where we have really pre-built products, more or less, or solutions for that industry. Of course, maybe there are other industries that are better suited for other CRM systems. I would say that's the main thing, but Lime CRM, as our main platform, is a very flexible platform.
That's why we have 60% of our revenue coming from the verticals and 40% of our revenue coming outside of the verticals. I think that we can cover a quite broad spectra of companies.
Yeah. Can you, can you elaborate on the higher spending on intangibles? Is this a new level? I could answer that. The intangibles is mostly what we capitalize on our own work in the development department. As Lime is growing with its staff, the development department is also growing, and we're also investing a lot in our products to have a competitive products going forward. Next question: Could you tell us more about the sale activities in Germany and in the Netherlands?
Yeah. I mean, I think that, as I said, if we look from an overall perspective, I think that we in Germany now in the second quarter, and also I would say it's already starting in the first quarter, from a Userlike perspective in Germany or in the DACH area, I think that we have seen gradual improvements, both when it comes to new sales and upsales, which I'm very happy to see. Of course, in the selling Lime CRM in these markets, we are targeting our focus customers within our verticals. It is quite long sales processes.
I feel still that we have a very good offering, today in Germany, the Mittelstand area, from a sales perspective, where we, as a European player, local player, come in with an offering, that is really competitive.
How is the business climate?
I think, I mean, the business climate is still a little bit tougher. I mean, now we've been having a tough climate for quite some time. I mean, both with the pandemic first, and then, of course, with everything started there in the beginning of 2022, when we believed that, okay, the market would be more on the positive note. It turned out to be still very tough situation. We see a little bit longer sales processes, but at the same time, I think, we have a position, and the deals in the segments that we are operating in are very long term, and that's also a good effect.
I think we see that when we can deliver an ARR growth, that is high and continue to deliver a good growth going forward.
Yeah. Have you been able to transfer your cost increases, in brackets, wages, to your pricing?
We have done one price increase. We started to do that in the end of or in the fall of 2022, with increasing the prices of the software. I think we decided to do it on a long-term perspective instead of doing a one-time increase to really continue to have a big focus on new sales. 'Cause that's something that we've been working hard. We're to get up to a level that we feel that, okay, this is that's where we are satisfied, since throughout the pandemic, we lowered the new sales. We took that decision in 2022 to see it in a more long-term perspective and to get, like, a yearly price increase within our standard contracts.
Of course, maybe in the short run, we see a wage inflation of around 4-5%, so of course, it's more or less on a similar note. In that sense, yes, but in the long run, I think this will be better for us going forward.
The orders, won via tenders, public affairs, do they carry lower than normal margin?
No, they don't have a lower margin. What you can see in those kind of deals is that it's a little bit longer sales processes, 'cause it's something that you start. Yeah, you work with that kind of deal in for many years, preparing and so on. In that sense, you also see that those type of customers stay for a very long time, and it's no difference in pricing, I would say, compared to a similar deal that is not in the public sector.
Thank you, Nils. That was the final question.
Thank you very much. Yeah, you know where we are if you have any other questions that you wanna ask us. Otherwise, we wish you a very nice summer, and thanks for listening in. Bye-bye.
Thank you. Bye.