Fortnox AB

STO:FNOX

Earnings Call Transcript 2024-Q1

[Unknown Attendee]

[Audio Gap] Fortnox investor forum. My name is [ Josbyn Cedar ], and I will be your host today. Unfortunately, none of our analysts could be here today. So this time, I will also take on the role as moderator.Our guest in the studio is, of course, Fortnox's CEO, Tommy Eklund. This stream will be about an hour long. The first part is dedicated to the quarterly results, which will be presented by Tommy. This will be followed by a question-and-answer session. You can submit your questions to Tommy anytime during the stream using the chat.Here is Tommy Eklund with 2024's first quarter results.

[Tommy Eklund, executive]

Hi, there. So welcome to the session. So let's start this so that we can focus on Q&A. As I always do, I keep it kind of short. And then we'll focus on your questions.So quarter 1 in numbers. Again, a very stable net adds of customers, 20,000 compared to 15,000 quarter 1 2023. So really good net adds in the quarter despite the macroenvironment. And also, our customers continuing to increase the usage of the platform. The ARPC, which is the average revenue per company (sic) [ customer ] in the platform, it increased with SEK 8. So that also a stable growth, which means that our customers are using more and more of our products in the platform. So both numbers stable in the quarter.Growth, as we have reported, we have an impact on the growth connected to the macroenvironment. But it's kind of stable. So we see no positive signs. So it's not changing. But there is not -- no negative signs either. So it's pretty much on the same level at -- so the impact is pretty much on the same level as it has been now quarter 3, quarter 4 and quarter 1.So we don't get anything for free, but we're getting there. So 26% in growth is a stable quarter despite the macroenvironment. And again, a really solid scalability regarding EBIT. So now we're delivering over 40% in the quarter 1, which we have never done before. So this is the highest EBIT margin that we have had in the quarter 1. So again, the business is showing scalability in all aspects.Yes. So if we just dig into the numbers and look back a bit, this is actually the highest net adds regarding customers that we have ever had, 20,000. About 2.6 of them came from Boardeaser. So they had about 6,000 customers. And in the Fortnox environment, that became 2.6 because we had some customers already in the platform. So a really solid number, especially with the headwinds we have in fewer started companies and also bankruptcies. So a really good quarter in all aspects.And as I said, our customers are increasing the usage of our platform. So they're increasing the number of products that they're using or number of seats, which is shown in the ARPC. So again, an increased ARPC, which is showing that we're continually delivering customer value. And this is a good measuring of how valuable our platform is since our customers are increasing the usage of the platform.And in this context, we are a bit ahead of our plan. So as some of you might know that we're -- the 5-year target on the ARPC is SEK 300 and that was originally SEK 150 when we started the business plan period. So we have the goal to doubling the ARPC during the 5-year business plan period. And now we're delivering a bit better than what we have in the business plan 2025.Yes. As I comment, 26% is a really good quarter. But we definitely are impacted by the macroenvironment, something that we have been now in quarter 3, quarter 4 and quarter 1. We especially see it in the marketplace segment, which we have seen, especially in the Offerta business. We have -- but we have -- we are impacted in all the segments, I would say.And also, for instance, since its fewer started companies, also the Lagerbolag business is impacted, and that has also impacted not only net adds, it has also has impact on the revenue. So a really good quarter, but, of course, there are some obvious headwinds in the growth of the net sales. But a solid EBIT anyway.And again -- you know that we're always working with the combination of EBIT and growth. So when EBIT -- if growth goes down, EBIT should -- goes up. So that's the Rule of Fortnox. The international definition is Rule of 40. And as you might know, we have our own definition, which is the Rule of Fortnox, which is Rule of 60. So when you add EBIT and net growth, we have an internal target on an annual basis, we want that to be healthy over 60. So this was another quarter that we healthily delivered that. So we were capable of having good balance between EBIT and growth.And as we normally do in these presentations, there are some fun facts from the platforms -- from the platform. We released our new product Fortnox Insight, which we have developed now for 2, 3 years. So it's a really important product going forward because it gives so much customer value to our customers. And now when we're officially releasing the product, it's actually 20% of all accountants that are using the platform -- the product on a monthly basis. So quite a big usage although the product is fairly new.And we are delivering -- we are developing new products for the Micro segments. So it's basic versions of our other products, which is addressable the Micro segment, which is 0 to 4 employees. And now those products are starting to pick up. So in the quarter, the Basic Payroll, which is the Payroll product addressing the Micro segment, it actually grew with 45%. So also those products are picking up right now.And usage is really important for us. In general, we know that engagement and usage in the platform, even if it's not always connected to subscriptions -- increased usage and engagement always drives revenue over time. And then it's important in -- the app usage is, of course, important for our long-term strategy. And in March, it was actually over 300,000 unique users, only in the app in March. So quite an impressive number now.And a couple of product and business highlights from the quarter. As I said, we released the Insight product. It's something that we have worked on for 2, 3 years now. So it's -- our AI team has worked on taking advantage of all the data that we have in the platform and giving back insights and guidance on what you should do to improve your business. It's a product that has been developed together with accountants. And now we are comfortable that, yes, we're delivering the product to the whole market right now. And the business model is that -- so accountants can work and, of course, customers can work with Insights as well. But if you want to share insights, then that receiver, so if it's an entrepreneur, they need to have access to the bookkeeping product. So that's the business model.So now it's really easy to share insights with whoever is interested in it. But of course, it's often accountants that share insights with the entrepreneur, and then the entrepreneur needs to have access to the bookkeeping product. So I think that will give a lot of customer value and a strategic product that we have worked on for quite some time.And we also officially released Assignment Agreements, which is, of course, an interesting product for our accountants because you always need an Assignment Agreement to work with a client, and it's something that you -- it's an administrative burden and it's kind of -- it's a lot of manual things to get that information inside the platform. Now it's very efficient to just distribute that digital, and all of the data that you need from the Assignment Agreement is automatically transferred to the Fortnox platform. And also a very positive side effect.Again, we're working with onboarding more and more users. So when you're distributing an Assignment Agreement like this, then you also onboard the entrepreneur, which is important because we know that, again, increased engagement from all different stakeholders when you run a company, it's important for the success of the company. And of course, out of the Fortnox context, that also has a big impact on the ARPC. So increased usage and a lot of value for the accountants. So kind of a small product, but really a lot of customer value in it.Yes. So we did an acquisition during the period in quarter 1. So this is a product that we -- or a company that we have gotten to know for quite some time now and we have sold their products, white labeled to our customers for quite some time now. And we really like the team behind Boardeaser and their products are superior. And it's products that -- it's areas that Fortnox hasn't been that strong in before because this is something that you normally need when you are a bit bigger. So this is -- the needs of consolidation, board portal and report and analysis is things that you normally have greater needs for when you become a bigger company.So this is a really good strategic fit product-wise because it's something that we haven't been that strong before. And it's a really good team. They are superior in what they're doing. And it's also important for our strategy to go for the mid-market, to go upwards and to offer value also to bigger organizations. Then these types of products are crucial to get there. So strategic and a really good team.Recurring Invoicing is something that we have now released in the quarter. So if you have recurring things that you need to invoice, for instance, rents or subscriptions or things like that, now it's really easy to do that in the invoicing product. And we have also -- when we release that, the -- it's preinstalled. So when you're doing Recurring Invoicing now, the default is to also use invoicing service and the payment checkout.So now we're combining our invoicing capabilities with invoicing service, financial services and payments. So when you're doing this, everything is automatically done. So it's really easy for our customers when they have Recurring Invoicing. They can do that one time and then we do everything for them. So we're distributing invoicing. We're doing reminders. We're offering payments to their customers. So it's another example where we're taking the position that we have in the platform and just doing it better for everyone, and also capturing more and more of the usage and the money flow.So last but not least, only a few seats left. So I encourage you to sign up for the Capital Market Day in May 23rd. So with that, thank you.

[Unknown Attendee]

Great. That concludes the first part of the stream, and we'll now move on to the question-and-answer section. Don't forget, you can still submit your questions in the chat..

[Unknown Attendee]

And we're going to move on to the first question. And it's a long one, so be prepared. As [Foreign Language] or the small business owner's best friend, Fortnox has gained substantial market share by offering modern software at an attractive price point. However, as far as I understand, your pricing on factoring roughly aligns with competitors despite Fortnox having a more efficient solution. Would it make sense for it to offer a more attractive price point to drive usage?

[Tommy Eklund, executive]

We're working with the price point all the time. So it's not something that is decided and we're never changing that. So this is an example where we're working with price on a continuous basis.And then the question about factoring, yes, it is factoring, but it's more like -- the way that we have developed that product, it's more like, I don't know, a payment solution because we have visibility on both sides of the invoice. So yes, it's a financial product, but it's more like a payment product. And what price that should be, we'll see going forward. But right now, I don't see that our customers are not choosing the product because of price because it's a lot of customer value. So it's really easy to use and the price is on a healthy level.So I don't see that price is a problem in that product right now. But yes, as you're referring to, we're delivering it much more efficient than any other vendor. So of course, you can work with price when you have -- when you are in that position.

[Unknown Attendee]

Great. Another comment. Could you please comment a little bit more on the low cash flow?

[Tommy Eklund, executive]

Yes. So as -- yes, we're using the money for -- we acquired Boardeaser. And we are also using the money for our financial services. But that, I guess, is quite obvious in the report. But then we also have an Easter impact. So it's roughly about SEK 40 million, SEK 50 million that is tied to that. We ended the quarter with Easter, and that's pretty much around SEK 40 million, SEK 50 million.

[Unknown Attendee]

All right. And next question is, we're seeing here in quarter 1 what we saw in quarter 3 when it comes to calendar effects impacting working capital and free cash flows. Are there any differences for quarter 2 when it comes to the reversal of those negative effects?

[Tommy Eklund, executive]

Yes, it will be a bit smaller because it was a long weekend because this was the Easter impact. So the impact was even bigger than just a weekend. It was the Easter impact. So yes, it will be a bit lower. But I actually think that also quarter 1 ends on a weekend. So I guess the biggest impact on just that number will be in quarter 3, I think.

[Unknown Attendee]

All right. The growth in the loan book here in quarter 1 was very high at SEK 133 million sequentially. Can you talk a little bit more about what you expect here going forward? And what it is that drove this high growth?

[Tommy Eklund, executive]

Yes, it's the factoring solution that I talked about. It's getting more and more popular. It is a really good product. And as we have shown now for quite some time, it doesn't impact our losses. So I think that the way that we have developed the product is really good. So it's a lot of customer value and we're being able to scale that now. So yes, I want that to grow. That's one of our areas that we're going for. So hopefully, it will continue to grow because it's a really good product for our customers. And for us, it's a good product to have in the portfolio. So all in all, a really good product. And yes, I want it to grow going forward as well.

[Unknown Attendee]

Yes. Another thing that's grown recently is the number of new employees. Comment a little bit on that, the high number of new ones?

[Tommy Eklund, executive]

Yes, we did acquire Boardeaser. So that's almost 40 people -- 37 people. So of course, that lifts up the number of people a bit. But we also hired a bit more than what we have done in the recent quarters because we just saw an opportunity to do that. The market for hiring people is really good right now. And I guess the macroenvironment will change. So this is also a preparation for the macroenvironment to change going forward.So you shouldn't read too much into it. It's a quarter, and we don't follow net adds regarding people quarter-by-quarter. So don't read too much into it. But yes, we hired a bit more than we done -- what we have done in the last quarters and we also acquired a company. So yes, we have more new colleagues than what we normally have in a quarter.

[Unknown Attendee]

Yes. There's another comment or a question about hiring. It appears you're hiring slightly more people and incremental margins suggest this is mainly in financial services. Is there any particular reason or a new product that makes us step up our game in these areas?

[Tommy Eklund, executive]

In general, the majority of all people that we're hiring are on the tech side. We are a tech company. We're investing in our product at our core. So that's where we're hiring. And then, of course, we're hiring people in the other areas as well. But the majority of the hiring are on the tech side and that's our focus.

[Unknown Attendee]

Next. The next comment is a little congrats to good results. There was a high net recruitment once again. Will this continue during quarter 2 and the rest of the year? Or will it slow down? And what are the key focus areas for these new employees?

[Tommy Eklund, executive]

Yes. Again, the tech side, that's our focus. We continue to invest in our platform. I think that builds the most value for Fortnox as a company, but that also builds the most value for our customers. So we will continue to invest in the platform. But again, you shouldn't read too much into how many people we're hiring in a specific quarter. So we're not guiding any different what we have done before. This is just normal business. And it's quarter-by-quarter, it can vary a bit quarter by quarter, but don't read too much into it.

[Unknown Attendee]

All right. Then moving on to Boardeaser a little bit. Was there any one-off items that you did not split out in your EBIT related to the Boardeaser acquisition?

[Tommy Eklund, executive]

It was about SEK 2 million in the asset transaction costs. So that's a one-timer that you can remove if you want to adjust EBIT. We don't adjust EBIT, as you know. So that is something that you can do if you want to do adjusted EBIT. And then, of course, that -- we also have a negative impact on EBIT in March. So it's a small uplift on the revenue growth, but it's a small negative impact on EBIT in March.

[Unknown Attendee]

Yes. The next question is, shares are taking a beat on FCF weakness today. Why are you not taking steps to make this an off-balance business and change the business model dynamics to mimic core Fortnox?

[Tommy Eklund, executive]

I don't know, it could happen. What's the --

[Unknown Attendee]

Well the -- how much of the 13% quarter-on-quarter growth in ARR is driven by price increases roughly?

[Tommy Eklund, executive]

We don't report that. So that is not a number that we have shared. So we'll see if we'll come back to that. But right now, we have not shared the impact that we have had on price. But I can say since I hear also rumors about price increase. The impact on price is the same in 2022 and 2023. And according to our prognosis, the impact that we will have on price on 2024 will be on the same level that we have had now 2 years back. So it will be on the same level. And I think that any outsider that is guessing the impact, they think it's bigger than it is.

[Unknown Attendee]

All right. Anything in particular that stands out in terms of drivers to the strong customer growth here in quarter 1, excluding the 3K coming from M&A?

[Tommy Eklund, executive]

I think it's -- I've said it now many quarters in a row that there are definitely headwinds regarding the net adds. So I think that we're showing that we're taking market share. And also that we're showing that the underlying business is delivering much better now than what we have done previous years because being on the level that we have done previously or even better as we are now in the environment that we are right now, that's quite impressive. So we're clearly taking market share, but also showing that the underlying business is delivering better right now.

[Unknown Attendee]

All right. Then moving on to current events, if you want to put it that way. How has the recent short report in financial or the Financial Times criticism impacted the way you think about explaining your business? Is there something you will address more on the way M -- CMD to remove uncertainty?

[Tommy Eklund, executive]

If there are any uncertainties, of course, we -- of course, we would like to explain that. So we don't, on purpose, try to be something that is hard to understand. So of course, we're listening into all feedbacks, but I think that will also explain a couple of things during the Annual General Meeting 2 weeks ago, where we also -- where I actually live show that a number of businesses in Sweden are right now 1.7 million. And it's quite easy for any outsider to just go online. It's -- you can go on any government site. And you can just -- it's 3, 4 clicks and you can see that the current number of businesses in Sweden is about 1.7 million. And I guess that was the most worrying in the report. So I think that we have cleared that out. But of course, you always need to listen in to feedback and become better and better. So I think that, yes, we will become better and better at explaining the business if it's something that is hard to understand, of course.

[Unknown Attendee]

And then coming back to the business, the card launch momentum, expect tailwinds from Swedish government abolishment of requirement to store physical receipts. Yes or no?

[Tommy Eklund, executive]

Yes, we think that, that will have a positive impact on the cards. And that will happen after quarter 2. So yes, that's good for the business. And we also have something that is important for us. We have not developed the approval process connected to the card yet. So it has not -- it has just been officially released for entrepreneurs because if we -- when we are releasing it to accountants, we need a more advanced approval flow connected to the card because it's an expense management solution. And then when an accountants are supposed to supposed to -- when an accountants need to be involved, then you need more advanced solutions for expense management. So that's why we have developed that, and that will be released least in quarter 2.So during -- after quarter 2, it will be released to accountants. So I think there are actually some positives in the business card. So both the regulations regarding the regular receipts but also the features that we need to be able to deliver to the accountants because the accountants are really the receivers of the business cards, although the end user are the clients, of course. The biggest value are, of course, the accountants. So it would be a good release in quarter 2, I think.

[Unknown Attendee]

All right. The next question is what have been the drivers for the customer growth. If we exclude Boardeaser, the customer growth is very strong. Has your strategy changed with regards to customer growth?

[Tommy Eklund, executive]

Yes. I think -- I wouldn't say it changed. I said that we have reported better and better ways of adding net adds. So 2 things we are investing in. We are investing in our own website. So we're becoming better and better. So it becomes more and more natural for entrepreneurs nowadays to start your business directly in the Fortnox platform. So more and more entrepreneurs comes into the Fortnox platform. They can read on how it is to run a business. They can easily start the business within 2 hours. It's really easy and we help them to get going. So we have a lot of services also connected where we're helping entrepreneurs to get going.So I think that, that becomes the natural way of starting your entrepreneur journey is the Fortnox website. So I think that is driving now. We're becoming better and better. And of course, that is driving net adds. But also the accountants, we have heavily invested in becoming better and better at explaining to accountants how much more efficient they could be by adding all their clients. So that was not obvious before. So before you may be added just a few of your clients because you thought that, yes, I can have a few in Fortnox and then I can have a few outside Fortnox.But now when you're using our workflow management system, so that's like a CRM system or workflow management system for clients so that it's accountants that can manage their clients in a very efficient way. But to gain all that efficiency, you also need to add all your clients. And that is something that we're helping them with more and more. So the whole quarter 3 and quarter 4, we had so many training courses with accountants where we actually explained to them. This is how it works and we actually help them to onboard all their clients.And of course, it's kind of a long-term investments but I think it's starting to pay off now. So it becomes more and more natural for accountants to add all their clients, not just half of them, for instance. And of course, that also adds to the net adds. So both distribution channels, both the indirect through accountants and our websites becomes better and better and I think that is showing now in the net adds.

[Unknown Attendee]

All right. For any new viewers that are out there, don't forget you can send in your questions in the chat, they are rolling in. But here's your opportunity to ask them. Moving on to organic growth. Can you break it down between, one, new customers; two, up-selling; and 3, price?

[Tommy Eklund, executive]

Yes. So that's kind of 3 buckets that we have. So the impact from price is very limited in quarter 4 because the new price difference that we have done for this year has no impact in this quarter. So the impact that we have on price in quarter 4 is the price change or price adjustment that we did in 2023, which is in quarter 4, very limited. So slim to none impact on price in quarter 4. So then we have 2 other buckets left, increase from new customers and up-selling capabilities.And we have had this in our business plan for quite some time now that during this business plan period, we plan to have 50% of the growth coming from new customers and 50% of the growth should come from existing customers. And that is something that we actually have delivered on for 3.5 years. And that was also the case in quarter 1. So pretty roughly said, 50% of the growth comes from new customers and roughly 50% of the growth come from existing customers. And in quarter 4, limited or slim to none impact on price just in quarter 4 or quarter 1, let's say -- sorry, quarter 1.

[Unknown Attendee]

Yes. Can you see that any specific module has increased in popularity in quarter 1 relative to quarter 4 last year?

[Tommy Eklund, executive]

Yes. In quarter 1, as I said, in general, these basic products are starting to get there. So they are definitely impacting the revenue now. So although they are kind of small, so in absolute numbers, they don't impact that much. But with the growth rate they have now, they will have bigger impact going forward. And I would say also, of course, the finance services. They are growing more than what we have on group level right now. So they are definitely contributing to the growth right now. And it's been an investment area that I've talked about many times before. We think that it's a huge value for entrepreneurs, financial services.If we can deliver those to the SME sector, that is a really, really important thing for them because when you are an entrepreneur, what you really want is guidance and insights on what you should do to improve your business and it's something that we released actually this quarter, this Insight product, which is AI-driven and it's really, really good for the entrepreneurs. And besides that, it's cash flow. And our financial services are actually something that were a cash flow product where we're automatically helping them with their cash flow and they don't need to care about it. So it's a lot of customer value for it. And I think that is shown in numbers now.So that is why that product is growing now. It's a lot of customer value on it. And the way that we have developed that product, I think it's quite unique and I think that we're showing that -- even if that financial services normally don't scale as a software business, we're actually showing that we're getting there now. So I guess it will not be -- the gross margin will be not exactly as if you have a pure software SaaS business, but we're getting there. It's very high gross margin and it's a really good fast-growing scalable business that we have added to the portfolio.

[Unknown Attendee]

Nice. Could you specifically give an update on your progress with your payment services and the Fortnox card specifically?

[Tommy Eklund, executive]

Yes. Yes. So I think that I have a comment on the card right now, but for anyone that missed it, it's a business card, you can order it for free, so you can order either plastic card or a virtual card for all your employees. So again, it's a product that is really good and it's for free and you can just take a picture on your receipt. And with the new law now coming up, you don't need to store the receipt, so you can just take a picture on that. And then we digitally store that and that is all you need regarding your history. So that digital copy of your receipt is enough, so you don't need to keep the physical receipt anymore, which is a game-changer for that product.So it's really good. So it's for free and you just take a picture on it and that is connecting with the AI bookkeeping capabilities so that then we automatically do bookkeeping based on that receipt. So of course, it's a really good product. And if you take -- also place that into the accountants world, of course, for accountants, normally, you get physical receipts, which can be really old and you need to do that manual. So it's a lot of work for accountants.Now that is put on the entrepreneur. They just use the card and they get a notice from the Fortnox app, "Take a picture of that," and then it's bookkeeped. So it's stored and bookkeeped. And what we also gain is that then we get all transactions in real-time. And when we get transactions in real-time, we can do real-time bookkeeping based on those transactions. So even if our real-time bookkeeping capabilities are really good now. We cannot do that if the data is old. So that is also an important way for us to also get expenses in the platform in real-time.So it's a strategic product in that sense and a lot of customer value, of course, in that product as well. And the business model is that since everything is for free, we earn money on transactions. So right now, we take 1% -- our share in the transaction costs are 1%. So that's our earnings, 1% on the expenses that our customers have. So that's the business model regarding the card.And yes, payments, we said that after quarter 1, I got a question of payments. And then we said that, yes, payments will probably be -- the year 2024 will be the payment year at Fortnox. So yes, we are investing in payments. We think that, that is something that our customers would benefit from. So it's piloting now. So it's different parts. So it's together with all the other products. So we have already released payment capabilities for the consumer side. So that's the checkout that I talked about before with the recurring invoices. So now the recurring invoices is connected to invoicing service, which is also connected to the checkout.So when you are a consumer, or I would say, a small company because if you are a small company, you tend to pay or act as a consumer. So that checkout payment capabilities is for consumers, but I would say also small companies. And what we are piloting now is the ability to pay everything else when you are a company. So that's your payroll, you need to -- you can do your pay slips there. You can do supplier invoices in the platform. You can pay your tax in the platform.So everything that you need to pay, you can automatically do that in the platform and we're adding all the different payrolls that you need. So you can pay with in any way that you want and you can pay everything that you want in the platform. So of course, that's going to be a game-changer. But we have not revealed any release date. But it's in pilot now and it looks quite promising.

[Unknown Attendee]

All right. Then regarding customer intake in the quarter, what is the mix between micro companies, small companies and larger companies?

[Tommy Eklund, executive]

We're not changing the dynamics in the platform that much. So it's a fair share of all those. But of course, the sole traders are in number so much more than the others. So of course, in numbers, there are more sole traders than others. And then the small numbers -- the small companies are in numbers more than the big companies. So I would say that we're taking a fairly -- the market share that we have already now, we're not substantially changing that. So we're adding now customers in pretty much the same pace in all different segments as we have historically done. So we're not fundamentally changing that. It's pretty much the same that we have had.

[Unknown Attendee]

All right. Then how do you plan to capitalize on private individuals as a customer group? You have invested a lot of time here in recent years.

[Tommy Eklund, executive]

Yes, it could definitely be an upside going forward. We don't have that in the business cases because we want to be a bit cautious regarding that because what we're doing now is actually trying to drive indirect revenue. So we want all the different touch points on consumers. For instance, the Offerta platform when the consumer pays an invoice, when a consumer get the pay slip, when you're doing your declarations, your tax declarations in the platform, all of that is something that we do as a consumer or a private person.But right now, we're not charging the private person. But I guess, over time, the value for using the platform also for private persons will probably be so big. So yes, we can start to charge. But right now, that is not our main driver. We are a business-to-business company. But when our customers that is businesses have touch points to private persons, we want that experience to be really good because that is driving the business-to-business revenue. So that's the main driver right now. But I agree with you that over time, of course, we will also deliver value direct to private persons. But right now, that's not our focus.

[Unknown Attendee]

All right. Then we had a round of list price increases announced in March. Has there been any feedback? And if so, what has it been?

[Tommy Eklund, executive]

Yes, the feedback has been none, actually. And again, I think that, that's because the prices are so low, to be honest. And I think that we'll also be something that if you have heard me talk before, you have heard me talk about that we don't want to do general price increases. We think that we can do so much more by just doing price optimization because we think that we're delivering so much more value than what we're actually charging our customers in certain parts of the platform. So by being -- becoming better and better at optimizing price and connecting price with value, we think that would be the main driver for increasing ARPC regarding price going forward.And I think that what we did like 2022 was just we increased everything pretty much on the same level. And we also did difference between 3 and 12 months, which we didn't have before. So it was just a general price increase. And then we became a bit smarter 2023. So we're not increasing all products. We increased the product that we have developed more than what we have done with other products. And I think that what we did now was even better.So yes, we increased the subscription on a couple of products, but the most of the things that were done were actually just moving around things so that we, in a better way, connected price with value. And I think that is also why no customer is reacting on it. And to be honest, for instance, invoicing, which was one of the biggest raise we did was like SEK 20. So it's SEK 20, it's $2. It's $2 a month. That was the biggest increase that we did. So it's not a big number anyway. But that was still a big raise for us. So we're coming from a really low price point. So yes, that was the price.

[Unknown Attendee]

All right. An unnamed competitor has recently announced the promotion where they offer to buy out the remaining contracts of Fortnox customers and this is a local Swedish competitor. Have you seen any notable changes in the competitive environment so far this year?

[Tommy Eklund, executive]

No.

[Unknown Attendee]

Easy-peasy, simple answer. No. Can you comment a bit on your AI investments? And where can we -- when can we expect an effect of those numbers from those investments?

[Tommy Eklund, executive]

I think you already see it. We have done that for several years now. We don't talk that much about it because it's kind of a trendy right now, but we have done that for many years. And a lot of our capabilities are AI-driven and we are increasing our investment in that area now quarter-by-quarter and it looks really promising. So our customers are already gaining from that, to be honest. And we are in a really good position because we have so much data, so much integration, so much usage. And all of that is -- and we are really good at taking advantage of the data and we are really too good at keeping the data secure and safe and structured, which is the base of all AI capabilities. So I think that we are in a really good position going forward. And again, if I should promote something, I think that you should come to the CMD where we will talk about more of the things that we have done around AI.

[Unknown Attendee]

Yes. Are we monetizing on this already? Or how far away do you think that is?

[Tommy Eklund, executive]

Yes, exactly. We are monetizing on that. So that is really happening. And as I said, the Insight product is entirely AI-driven. So we are already doing that. The factoring -- the invoice -- the factoring product that we have is all AI-driven now. And we would never be able to deliver so much value and so much scalability in a financial service if it weren't for the AI-driven capabilities that we have done there. So we're taking advantage of a bunch, you know, data points to figure out the credit risks on all invoices in the platform. So it's quite impressive now with all the money that is flowing, all the invoices that are flowing in the platform. We're taking advantage of more and more data points now to figuring out the credit risks on all invoices in the platform. And I think that we communicated now was the last number like 800 billion that is customer invoiced in the platform. So it's a huge number. That's like 15% of GDP that is customer invoiced in the platform.And we can now, in real-time, put a number, that is the price that you should pay for an invoice regarding credit risk. That is something that we now can do in real-time based on a bunch of data points. And since the platform is learning itself, we're becoming better and better and better. And also with the payments that we have, then we also have the answer because when you're training AIs, the most important thing is to have the right answer. And since we know if an invoice was paid and if it was paid on time or it was -- if it was overdue, that also will have an impact going forward on how our credit assess different invoices and different customers. So we have structured data, and we have the answers. And with that, it gives us really good capabilities to improve, for instance, AI credit scoring.

[Unknown Attendee]

All right, keeping going with AI. Do you have any plans to roll out generative AI features like chatbots?

[Tommy Eklund, executive]

Yes, I think that we will have that.

[Unknown Attendee]

Again, short, sweet to the point. You mentioned previously and you mentioned previously this year as well that this should be the year for Pengar. How is that going?

[Tommy Eklund, executive]

I think that we're showing that we're getting there. Of course, we have just started. It's still just a fraction of our customers that is using these services, but it's growing more than what all the other segments are doing on group level. So I think that we're showing that those investments has been really good and we're getting there. I want to do so much more, of course. But I think both revenue-wise, we're getting there, but also scalability that we're showing that we can actually also deliver financial services scalable, which is the DNA of Fortnox's scalability. So it's important for us to not just start to add products where we cannot keep the margin. But I think that even with a complex product like a financial service product, even on those products, we can show scalability because we are so good on the tech side, so.

[Unknown Attendee]

All right. Again, quite a long double question here. How do you understand the ARPC number of SEK 276 in light of the dampening macro effect? We can start there.

[Tommy Eklund, executive]

Yes. It's a good question because it would probably be higher if it weren't for the macroenvironment. So yes, there are some obvious headwinds there. So since the ARPC is net revenue divided with number of customers. Yes, net revenue is a big portion of ARPC and the net revenue, we have negative impact on the net revenue right now. We don't see that it's bigger than what it had been in quarter 4 and quarter 3, but it's there. It's on a lower level. But it's not better either. So it's not worse. It's not better. It's pretty much on the same level. So yes, we're quite sure that the net revenue would have been better if it weren't for the macroenvironment. And I guess the macroenvironment will eventually change.

[Unknown Attendee]

All right. And then the second part of that question was, and how do you understand the ARPC number as on back of [ BookCue ] that ended its free model. And Billogram shift of customers to you, have that had any effect?

[Tommy Eklund, executive]

Yes. Those small vendors, they don't have that much customers. So it doesn't impact that much actually. But of course, I think in general, I think it's good that all players have a sustainable business model so that all players play with the same rules, so to say. So in that sense, I think it's good to have -- that all players have a sustainable business model. But other than that, those players are kind of small, so it doesn't have that much impact, to be honest.

[Unknown Attendee]

All right. We're starting to get sort of to the end, but we have a few more questions that we're going to squeeze in.

[Tommy Eklund, executive]

Yes.

[Unknown Attendee]

The next one is, how do you plan to give more information about the upcoming business plan for Insights and Fortnox company card in connection with the Capital Market Day?

[Tommy Eklund, executive]

Yes, since those products are fairly new and we haven't talked about them that much, so that will definitely be present there. So you will hear us talk about it, both the product managers, me talk about it, the product area managers, and you will also have the ability to start to feel the product, and we will demo the product. So I encourage you all to go here because it's strategic important product for us. So I think you will get better understanding of the possibilities of those products when you're participating in the CMD. So I encourage you to do that.

[Unknown Attendee]

All right. And next question is about M&A opportunities. How many are you looking at?

[Tommy Eklund, executive]

Yes. So it's -- I think I said that some time before, so it's not a secret. I think we looked at 200, 300 companies last year, more than what we did the previous years, and that is because the environment has changed a bit. So it's better for the buyer than it was like 2, 3 years ago. So yes, there are definitely opportunities out there. We're not guiding regarding number of acquisitions per quarter because it's not important for us to go for a specific number. It's so much more important that it becomes the right one. So we're in no rush, where we don't need to buy net growth.So to acquire growth, I think that that's not better than any other growth. So I think that if we're finding a company that we think is really good people like the Boardeaser case, it's a really good team and they have a superior product and it's something -- a capability that we don't have and customers are asking for it. Yes, then we -- of course, we have 50 development teams right now. We can develop everything in-house if we want, but it's about priority. I want my teams, the current 50 development teams to focus on the core products to continue to deliver customer value because that's our core.And then it's really good to have the capability to broaden our offers when customers are asking for more things like we have the app market. It's almost 500 apps right now in the app market that takes care of a bunch of different customer needs that are too specific for us to develop in the core product. So that market is really good to take care of all those corner cases. So it's really easy, you can buy products from us. And then you can buy apps for your specific needs if you have something that we haven't developed.So we have our own development teams. We have partnerships and corporations. We have the apps and we have the M&A capabilities. And it's really good for us to have different ways of broadening our portfolio so that we don't need to develop everything in-house. So that's why I think it's good to have that capability, then we're not pushing that. So we don't need to have that, but it's a good way to sometimes go faster to the market when we're finding a really good product or a really good team that we think can contribute to the Fortnox platform.

[Unknown Attendee]

All right. Then we have actually arrived at the last question unless someone out there thinks of a question in the next 3 minutes or so. Since macro for Fortnox is seen in the marketplace, as you described it, talk about how growth paced throughout the quarter.

[Tommy Eklund, executive]

Yes. So yes, again, growth. Yes, I think that all parts of the business are impacted by the macroenvironment. But of course, a couple of areas are impacted more. So for instance, the marketplaces, especially on the consumer side, so that's private persons doing home renovations, which is a vertical in the Offerta platform. It's definitely lower than it was like 2 years ago because it's not that many people that are doing home renovation than it was 2 years ago. So that's definitely an impact. The Lagerbolag business definitely has an impact. Lagerbolag businesses when customers are buying companies from us that we have pre-started for them. And since it's fewer started companies in Sweden, that also has an impact on that.Then in general, the financial activity in the platform is lower than you would expect from a macroenvironment that is on the high side, so to say. So for instance, there are fewer invoices in the platform, both customer invoices and supplier invoices. So the activity in general has an impact on the transactional base revenue, but it also has an impact on the subscription because it could be fewer users. And since a lot of the subscription revenue is per seat and per product, then if it's fewer seats in the platform, that also has a negative impact on the ARPC. So it's a little bit of everything in the platform, but there are a couple of things that are more impacted than others.

[Unknown Attendee]

We did actually get one more question.

[Tommy Eklund, executive]

Okay.

[Unknown Attendee]

Because what would an investor forum stream be without new market questions? This one is about the Norwegian market that you touched upon a short time ago. Is there any short comment here? Is the Norwegian market approaching? And are you allocating some tech investment to a potential Norwegian entry?

[Tommy Eklund, executive]

No, not right now. We're focusing on Sweden. I think the business case in Sweden is still very, very early stages. So we have a bunch of growth left to do there. So I don't see that we have saturated the market in any aspects in Sweden. And if you just look at all the opportunities that we have, I think that we should focus on them. So right now, my top priority and focus is Sweden.

[Unknown Attendee]

All right. And that's that. That is what we have time for today. Those are the questions that have come in. Thank you, Tommy, for being here...

[Tommy Eklund, executive]

Thank you, [ Josbyn ].

[Unknown Attendee]

For answering the question. Of course, thank you to everyone that's watched the stream. Our next investor forum will be on July 12 at 10:00 a.m. Central European Summer Time. Hope to see you then.