Why Limeade (ASX:LME) shares are bouncing around today

The Limeade (ASX: LME) share price is bouncing around today, and has ended up where it started. Here’s how its earnings report read.

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The Limeade Inc (ASX: LME) share price is having a rather wild day today (well, mildly wild).

At the time of writing, Limeade shares are flat at $1.50 apiece. But that’s a ways away from where the software solutions provider opened this morning at $1.56 a share (up 4% at the time). Just after open, the company dropped to the current share price, so it seems investors can’t quite make up their mind on the results of Limeade’s earnings report that was released this morning.

The report covers Limeade’s full 2020 financial year (which runs from January to December).

What did Limeade report this morning?

It was an unquestionably strong set of numbers that Limeade delivered today. The company reported revenues grew to US$56.6 million, up 19.3% from the US$47.4 million Limeade reported for 2019. Of that US$56.6 million, US$54.9 million came from recurring subscription revenue, a 20.8% rise over 2019.

Limeade also helpfully pointed out that between 2015 and 2020, revenues grew at a compounded annual growth rate (CAGR) of 24%.

Having said that, Limeade’s cost of revenue also rose 12.6%, from US$11.1 million in 2019 to US$12.5 million in 2020.

Total operating expenses also rose 11.4% to US$43.1 million, up from the US$38.7 million from 2019. The largest component of this rise in expenses was research and development costs, which rose 14.2% to $16.8 million. An increase in staff count (from 236 in 2019 to 271 in 2020) also didn’t help.

Even so, the company reported a gross profit of US$44.1 million, up 21.3% from 2019’s $36.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at US$1.2 million. That was a 160.3% improvement on 2019’s earnings loss of US$2.1 million. Gross margins were also up 1.3% to 77.9%.

On the net profits after tax (NPAT) metric, the company still recorded a net loss of US$0.3 million, but that was a 92.1% improvement on 2019’s NPAT loss of US$3.4 million.

The company’s cash position sits at US$31.5 million, with no net debt.

Looking forward to 2021

Limeade has given some pre-emptive guidance for the 2021 financial year as well today. The company tells us that it expects US$50-53 million in revenues for the year. It also expects to lose between $5-8 million in EBITDA and to lose US$7-10 million on the NPAT metric.

Here’s some of the commentary the company gave regarding this guidance:

COVID-19 slowed new customer growth in 2020 and therefore impacted revenue outlook when coupled with 2021 forecast churn… Growth in new 2021 customer acquisitions will continue to be seasonal, accelerating in H2 and contributing to revenue growth in 2022.

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Limeade, Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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