Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fortnox AB (FRA:9E80, Financial) achieved a significant milestone by delivering over SEK200 million in EBIT for a single quarter for the first time in its history.
- The company reported a solid 27% growth, with 26% being organic growth, despite macroeconomic headwinds.
- Fortnox AB (FRA:9E80) increased its customer base by 16,000, surpassing the previous year's addition of 15,000 customers.
- The ARPC (Average Revenue Per Customer) grew to SEK285, nearing the five-year target of SEK300 by the end of 2025.
- The company's Rule of 40 score reached 67, indicating strong combined growth and profitability metrics.
Negative Points
- The current run rate of new customer additions is below the 2025 target, indicating potential challenges in meeting long-term goals.
- The financial services segment showed a lower year-over-year margin due to lower revenue recognition of unplaced payments.
- There are ongoing macroeconomic headwinds that could impact future growth and customer acquisition.
- The ARR (Annual Recurring Revenue) growth excluding Offerta was about 25%, indicating no growth in Offerta.
- The shift from subscription to transactional-based revenue has a negative impact on ARR, despite being neutral in terms of net revenue.
Q & A Highlights
Q: Could you talk about the momentum in core transaction-based products? They saw a significant sequential bump here in Q2. What are the drivers here in terms of price and general activity?
A: This is part of our ongoing price optimization strategy. We have three ways of charging our customers: subscription-based, transactional-based, and lending-based revenue. This quarter, we moved some revenue from subscription to transactional-based, particularly in payroll. Additionally, we implemented a price increase effective April 1, with higher increases on transactional-based revenue compared to subscription-based revenue.
Q: Do you expect the new customer pace to pick up as the current run rate is below the 2025 target?
A: Yes, we have a plan to reach our 2025 target despite current macroeconomic headwinds. We are improving our collaboration with accountants and focusing on the micro-segment (companies with zero to four employees), which should positively impact net adds.
Q: Can you provide more color on the new customers? Are they incrementally more sole traders or more on the bigger side of the SMBs?
A: The demographics of our customer base remain consistent. However, new customers are becoming more active, which positively impacts our Average Revenue Per Customer (ARPC).
Q: The segment margin in financial services was lower year over year due to lower revenue recognition of unplaced payments. Could you elaborate on this?
A: We have improved our financial platform to better manage and return wrong payments, reducing unplaced payments revenue. Additionally, we increased marketing and sales efforts for our factoring product, which grew by almost 80%.
Q: How many of your customers are taking up your lending products today, and what is the average ticket size?
A: We haven't shared detailed numbers, but roughly 10% of our customers use our invoicing distribution service. The factoring product, which offers significant customer value and market opportunity, is still used by a small portion but is growing rapidly.
Q: How much revenue in Q2 was shifted from subscription to transactional-based revenue versus the prior-year period?
A: We have not shared exact percentages, but the shift is substantial enough to be noticeable in the numbers.
Q: How is the [batal] service progressing?
A: The service is currently in pilot and will be released later this year. It will allow customers to handle all payments within the Fortnox platform, offering significant customer value.
Q: What do you make of the second article by the Financial Times?
A: We believe there was a misunderstanding. We are investing in delivering value to smaller accounting firms and measuring progress through the adoption of our digital agency product.
Q: Given the strong marketplace growth and comments that Offerta did not grow year on year, could you elaborate on the growth of integration or e-sign?
A: E-sign is growing better than the group level, and the integration market is also performing well. We have also changed the business model for our expense management products, impacting revenue in the integration market.
Q: How much pricing potential do you see in the long run as you shift more subscription to transactional-based?
A: The pricing potential is significant. We continuously optimize pricing to connect value with price, and we see endless opportunities for further optimization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
