Fortnox AB

STO:FNOX

Earnings Call Transcript 2023-Q2

[Predrag Savinovic, analyst]

Hi, everyone, and a warm welcome to the Q2 earnings call with Fortnox. We are in Växjö in the Fortnox studio and the Fortnox headquarters. And with me, as usual, I have Tommy Eklund, the CEO of Fortnox. And my name is Predrag Savinovic, I'm an analyst at Carnegie Investment Bank, and I will be moderating this call. So as per usual, Tommy will start with an intro to the quarter, some highlights, and then we will kick off the Q&A. And please send your questions through the chat here, and we'll take them accordingly. So please go ahead, Tommy, with the intro for the quarter.

[Tommy Eklund, executive]

Thank you, Predrag, and thank you for hosting this. I appreciate it. Yes. So let's go. Yes. I don't know, I guess I'm going to change slide now, but it's not changing there. Yes. So let's dive into the numbers.

Okay. So as usual, we're looking at a number of customers and the usage, which we are calculating as ARPC, it's average revenue per customer and month. So 2 solid numbers, net growing with 15,000 customers on the level that we did previous, quarter 2. So a solid quarter because as you all know, there are some headwinds regarding the net growth of customers. There are fewer companies started in Sweden during this quarter than it was previous quarter 2.

And we also have bankruptcies that is holding back the net growth of customers. So taking that into account a solid growth regarding a number of customers. And also SEK 11 may not sound like a big number, but on our customer base, that's quite a solid number as well. So we're again showing that our customers are using more and more of our products. So they're spending SEK 11 more on our portfolio this quarter than what they did previous quarter 2. So all in all, a solid quarter regarding number of customers in ARPC financially. And as you all know, this is not something that we're guiding, but we're saying that we're keeping track of this. So we're using the rule of 40 as a KPI to maintain a good leverage between EBIT and growth. So again, a solid quarter regarding that as well.

We're having almost 31% organic growth in the quarter. Previous quarter 2, we also had acquired growth. So we're actually growing the organic growth with roughly 3% in the quarter, which is solid in the environment that we are in. And we're also showing that we are scalable in our business. So EBIT actually growth more than grow -- more than 50% during the quarter. So that ends up with a 70% regarding rule of 40 or rule of Fortnox as we're seeing.

Yes. So customer usage. So put this number of customers into some kind of historical context. So an interesting milestone was reached during the quarter where we are exceeding 500,000 businesses in the platform. So now more than SEK 0.5 billion of our -- of the Swedish businesses are now keeping -- are now using the Fortnox platform. So quite a big milestone and something that we have worked on for quite some time.

And also the ARPC also reached a milestone where we're exceeding SEK 250. And again, it doesn't -- it may not sound like a big number, but to exceed SEK 250 is kind of a big number for us. And also take into account that, yes, it's a good number, but take into account that, that is just like $20 a month. So still quite a low number in absolute terms that our customers -- if you're running a company, you're spending $20 a month on the Fortnox platform, which is your backbone when you run your company. So yes, it's a good number for us and it's growing, but it's still a reasonable small number. So it's more -- we have more growth there. Yes. And shifting back to -- or it's not working. So I don't know if I got the wrong one here. Maybe you guys can change the slide instead.

Yes. So financially, regarding net sales and EBIT. So to put these numbers into some kind of historical context, growing with more than 30% organically is quite solid. And also having 40% -- almost 40% EBIT is, of course, a solid quarter in all aspects. But if you look at the actual profit, it actually grew more than 70% during the quarter. So again, I think that we're showing that scalability is the DNA of Fortnox. We're focusing on scalability in all aspects. So again, a really good quarter financially. And if we put growth and EBIT together in the rule of 40, again a massive number, I would say. It's not that many companies that can deliver on these levels. And I think we can be quite proud of that we're actually delivering organic rule of 40 over 70% now 4 quarters in a row. So that's quite solid. So that is something that if you put that in some kind of international comparison, it's really hard to find companies that are delivering on this level.

So it's something that we're quite proud of. So just a few words since we're halfway through the business plan for you guys that have heard me talk about Fortnox, you also heard me refer to our business plan, which we communicated during our Capital Market Day like 2.5 years ago. So now we're halfway through this business plan, which is the business -- a 5-year business plan up until 2025. So just mentioned a few words where are we? We put 2 public KPIs they're saying that we are going to double the number of customers, and we are also going to double the usage. So now halfway through. We had 350,000 companies in the platform when we communicated that we are going to double the number. during this 5-year plan. So now we have, as reported, 510,000 businesses in the platform. So if you just put that in some kind of diagram, you can see that we need to, in absolute terms, increase more regarding number of customers at the second half of the business plan, which was also communicated that, that is the plan.

So we had, as you know, our sweet spot, historical sweet spot was 5 to 9 employees. And we said during this business time period, we are going to invest also to be able to deliver value to the micro companies, 0 to 4 employees. And then after that, also invest into bigger organizations. So we think now that we have for what we have done for the last 2, 3 years now, expanding our offers towards the micro segment.

That will have a positive impact regarding number of customers, but it can also pressure ARPC because those customers, at least initially could have a lower ARPC so that can pressure the ARPC. But since we are also investing in expanding into bigger organization, we think that we can keep up the air policy. But you can also see that we said regarding the ARPC that we're going from SEK 150 to SEK 300 during this business time period. And of course, you can see that now we're reporting SEK 253. That is, of course, a little bit ahead of our plan. but take into account that it can be pressured by adding more micro companies in the platform. We think that we can demographically keep the platform by also expanding into bigger organizations. But of course, that is how this works. If we're adding more customers, that will pressure ARPC.

If we're adding fewer customers, we can easily increase the ARPC. And as Predrag also reported and has reported now for quite some time that, of course, a number of customers was the #1 KPI when we started Fortnox, but over time, a number of customers will be less and less important and ARPC will be more and more important. So as time goes, number of customers will be less important and ARPC will be more important. And just to mention a few other things that we're working on since we're halfway through the business plan. We also said that we are going to go from only focusing on the biggest accounting firms, so also focus on smaller accounting firms. So I think that we have shown also to the market now that we have a really good offer for accounting firms in the mid-segment. So we are quite dominant in that segment, and that has happened during this first 2.5 year, I would say. And now what will happen going forward is that we also move ourselves into also being able to offer value to the smallest accounting firms. So that is what we have done, and that is what will happen going forward. We also said that we are going to move more money into the platform, more financial services. I think that we're showing that that our financial services now is growing almost 50% this quarter.

So I think that we're showing that more and more of our customers are taking advantage of our financial services. But -- so we have added really good services that our customers like, but we have not moved all payment rates into the platform yet. So that is what we will do going forward, moving more and more payments in the platform. So I think that is one of the things that should happen during the business plan period, and I think we're on track on that as well. We also said that we are going to increase usage. So usage is important for us. We -- not all usage is connected to revenue, but we think that we're building more value to our customers if we increase the usage. So we think that we eventually would earn money on it even if we don't earn money right now on usage. So that's why we're pushing usage. And now we can see also that usage is growing more than customer is growing. The number of customers growing. So for instance, app usage is growing faster than number of customers is growing. So I think we're on the right track there. We have more to do, of course, but we're investing in the right things there. Also regarding transactions, we said that transactions are quite important for us, and we invested in more integrations to be able to retrieve all the transactions because we think that our revalue in the future will be that we can guide our customers on what they should do to improve their business.

And to be able to do that, we need to have all the information on their business because with all the information, we can do things like AI bookkeeping and with AI bookkeeping, we have real-time information on how your company is doing. And based on that information, we can give insights and guidance on what you should do to improve your business. So I think that we have not -- we're not there that we're guiding our customers on what they should do, but we're doing more and more regarding transactions, making sure that we have more and more of the data that we need to take advantage of when we are guiding our customers on what they should do to improve their business. So halfway through, I think that we're doing the right things. Moving forward, we will focus even more on benefiting on all the data that we have there. And also, we said that we are going to -- historically, we have been very focused on, especially bookkeeping because we started with bookkeeping and we said that during this business plan period, one of the main things that needs to happen is that we need to move from bringing just one product company in to have several products, more like a platform to run your business. And in rough terms, one can say that we have about 46 products right now and bookkeeping is one of them.

Then we have, of course, products that are related to bookkeeping, but it's actually just 1 out of 46 right now. So we have definitely expanded a number of products. And in rough terms, this is kind of hard because we're not reporting revenue per product. But in rough terms, the revenue on bookkeeping right now is about 15% to 20% of the group's revenue. So one cannot say that, yes, of course, it's a big product, but it's not dominant. More than 80% over revenue comes from the other products. So I think that we have moved ourselves to being more like a platform to run your business on. So I think that we're not done, but we're going in the right direction there. So that was just a small -- a couple of things that is happening halfway through the business plan period. Yes, we reported, I think it was in quarter 3 last year that our customers were distributed disputing more than 1 invoice per second in the platform. Right now, we can report that during this quarter, we, in our invoicing service, this are now distributing 1 invoice per every 10 second. So that service is growing, and more and more of our customers are taking advantage of our distribution mechanism and, of course, collection and reminders and all of that.

So an interesting service that is growing more than other products are doing right now. As reported, we introduced early 2022. We released this AI bookkeeping. So as I said, we started with having integrations to all the bigger banks, and that is growing now. So more and more of our customers are naturally connecting their bookkeeping to their bank account. And with that connection, we can automatically handle their bookkeeping for them. So that is product is now 30,000 customers that are using that product and that was introduced last year. So -- and it was -- and it grew 35% from quarter 1. So that's quarter-by-quarter sequential growth of 35%. So it's a product that we know it's a strategic product. We have said that we're not even focusing on the business model yet. We know that this is a huge value that we're delivering. So right now, we're just building a big enough customer base to be able to build an ecosystem and a business model around it, but this is one of these really important strategic products. And obviously, our products -- our customers like the products as well. So that's promising for the future. We have not reported how many customers before, how many customers that are using our integrations.

So this is kind of a new fun fact, but it's actually more than 100,000 or more than 110,000 companies that has one or more integrations with the platform. So that is they are paying us for a product for an integration product to be able to connect the Fortnox platform with other software that they are using to handle their business. So quite impressive. And again, this is kind of a celebration. So 500,000 businesses in the platform, quite massive. And the company that become the 500,000 customer was this company, Lotus Maskin & Transport AB in Norsborg.

So we're happy to have them as a customer, and they're benefiting from the simplicity of the Fortnox platform and they run their business. So it's kind of fun. Yes. And as always, there are a lot of new features in the platform, especially now focusing on the app. So we can see that more and more of our customers are actually running their business in the app. So that's why we're also focusing to be able to deliver more and more features into the app. But it's not just about to move features from our web product to the app. It has to be adapted to that way of working. So it's actually not moving features. It's more eventing new features that is suitable for an app usage. But more and more of our capabilities are now delivered into the app so that our customers can easily run their business in the app now. So this was just a couple of examples. And for instance, now our business made box is also available in the app and really easy to use and a lot of other things as well. Yes. And as I said, bank accounts now all the bigger banks are connected to the Fortnox platform.

So if you have 1 of the 5 big banks in Sweden, you can automatically connect your Fortnox platform to your bank and with that, also have AI bookkeeping. But what we did here was that we took the investment to integrate because it's kind of complicated because you need to go to deeper into the integration to be able to retrieve all the information that you need. You cannot do that with the open API. So you need to go deeper to be able to do this integration with the banks to be able then to do bookkeeping. So we have taken the investment to do that on all the bigger banks. But in parallel, we also opened up so that we have an open API. So all the smaller banks, the niche banks can do that based on our API. So now more and more of these smaller banks are also connecting their platforms with Fortnox platform. So now you can use independently in what bank you have, you can now connect your bookkeeping or your invoicing with your bank, which will give you a superior experience when you run your company in the Fortnox platform. Yes, and some synergies with the Marketplace segment, Offerta released an entirely new website, which is important because that's the customer-facing part in that business. So we have some synergies here because we reuse all the things that we have done on Fortnox.se and developed a new site for Offerta.se.

So that was released during the quarter. So that's a big thing for the marketplace segment during this quarter. Yes. And customer -- I know your customer and anti-money laundering features becomes more and more important for us because more and more of our products, you need to have -- to control and check up on your customers more and more when you are going to deliver features like we do. So it's more and more important for us. So we need to improve in this area, but it's also more important for our partners in the accountants that are obligated to do these things. So that's why we're also during this quarter, signed an agreement to be able to deliver these service both for our own sake, but also for the accountant. So now late this year, we will release the possibility for accountants to take advantage of our capabilities regarding KYCs and AML as a business because it's something that they're lagging behind a bit because when you're an accountant, you need to do this. So we're helping them to do what they are obligated to do with this service. And as always, we're leasing a lot of features for the contents. One of the bigger things during the quarter was that now we have moved the process of handling payroll into the product that we have for accountants. So we have invested quite a lot in our payroll solution.

As you know, I have reported that for numerous quarters now that this is one -- has been one of the investing areas that we have done. So we're investing quite a lot in that area. And it's also growing more than other products. So it's a popular product that they're investing in, but we have not invested that much into the product that we have for accountants so they also can benefiting. So if you have run a company, you can put the administrative payroll process on your accountant, but we haven't supported that in the product. Now we have released support for that. So accountants also can handle the administration around payroll for their customers in an easy way. Yes. So that was the presentation. And as always, I'm not going to show these appendix, but we keep them updated. And for your sake, we're just distributing them and they are updated. So they're there for you and you can use to get a better understanding of the business.

[Predrag Savinovic, analyst]

Okay. Perfect. Thank you very much, Tommy, for the intro. And to the audience, we are now entering the Q&A session. [operator Instructions] Let me start with a few on the report. If you could break down the growth a little bit for us. So 31% is organic. There is a price hike in here. You have -- you're growing back with customers and you go in with usage. If you can give some flavor on those 3 buckets.

[Tommy Eklund, executive]

Yes. So as I said before, when we're doing the business plan, we -- at least during this business plan period, which is the 5-year business plan that we're now halfway through. We have planned to have 50% of the growth should come from new customers and 50% of the growth should come from existing customers. We didn't plan for any bigger price hikes, but then we have done a smaller price increase last year and 1 this year. So one can say that with that, we also introduced a third bucket. So we have 3 buckets now, which are not exactly the same in volume but in similar sites. So I would say that 1/3 comes from new customers, 1/3 comes from existing customers and 1/3 comes from price increases.

[Predrag Savinovic, analyst]

Okay. And I believe in the last quarter, you adjusted ARR figure for the price hike entirely or do you have anything in the ARR from the price highlighting currently still?

[Tommy Eklund, executive]

No, that is now included in the ARR. So that has no impact on the ARR right now.

[Predrag Savinovic, analyst]

Okay. And if we take a look then at the usage-based revenue growth, you mentioned in the intro here as well or in the presentation, integration is going well. invoicing services are going well. But if you can give some flavor on except for the price hike and the customer growth, which are the typical modules you see now or initiatives that are...

[Tommy Eklund, executive]

I think that we're growing all over, and that's why we're quite solid. So nothing sticks out, I would say. But what you learn is that new products takes longer time than you plan for calendar-time wise. And I think that is happening now with invoicing service because you have heard me talk about invoicing service for 2 or 3 years now because it's a really good product, and I thought that everyone would use it. but now it's picking up.

And Predrag, which holds -- which is the segment that holds invoicing service and also all the lending business is growing almost 50%. And we think it's some headwind in that. So if there was a tailwind in the financial services, we will probably have even better growth in that. So growing like almost 50% organically in a segment with some headwind. It's quite stable.

[Predrag Savinovic, analyst]

So we expect even more there?

[Tommy Eklund, executive]

Sure. I'm not saying that. I'm just explaining the quarter right?

[Predrag Savinovic, analyst]

If we take the 15,000 customer metric, it's quite interesting. I fully agree. And like you said in the intro, we don't care that much for that anymore because you have quite a lot to do on your ARPC side. But if you could, also on that one, break it down a little bit in terms of size. You could potentially add 1 customer that is worth 500 or 1,000 monetary terms. So what does it look like for you in this quarter?

[Tommy Eklund, executive]

We don't see that we fundamentally change the demographics in the customer base yet. So what I said during the presentation was more kind of a speculation that it might happen that when we're taking in more micro companies might change the demographics in the platform, but it hasn't happened yet. So right now, these -- when we're adding about 15,000 new customers, it's pretty much the same as it has been before.

[Predrag Savinovic, analyst]

All right. And I believe you have also had some more success in that in larger businesses as well, so which should mitigate the effect?

[Tommy Eklund, executive]

Yes, exactly. But that has no impact on a number of customers, as you know, because there are so few, but it definitely has a good impact on the ARPC. And as you know, the products that are priced a bit higher like factoring and offer a subscription and all of those, they are 20x or 50x higher priced than the core product. So it's just a couple of thousand companies. And of course, the penetration is really low. If you have 500,000 customers, and we still have a good portion of revenue coming from a couple of thousand of the customers. So of course, there is a huge potential in the ARPC, but it has no potential regarding a number of companies.

[Predrag Savinovic, analyst]

Yes, makes sense. You did speak a little bit of bankruptcy rates and the net growth in new customers. And we've seen the statistics they are dropping. But still you are at trend or even slightly above. So what have you been doing to keep this pace? Or what are your competitors doing, rather? How are you still maintaining for this quarter, such high growth?

[Tommy Eklund, executive]

Again, I think it's a little bit of everything. I think that we, in our labor business, we become more and more the natural place where you start your company journey. So I think it's natural for more and more private persons. That's where I start or if you have a couple of businesses, okay, maybe I should start a new business, let's do that in Fortnox. So more and more customers, I think, are seeing the convenience of doing that in the platform directly. So that is we're becoming better than that.

But also, I think that more and more accounting firms see the advantage of having all their clients in the Fortnox platform because they become more efficient and they can take advantage of all our services. So I think that is something that we see also that you maybe not initially put all your clients into the platform. But now they see that, yes, it's more efficient if I put all my clients in there. So I think that also have a positive impact on our numbers right now.

[Predrag Savinovic, analyst]

Okay. The margin then, we have to talk about that, it's quite high. Do you have any spending plans for the remainder of the year that might shift this? Or is it a representative figure?

[Tommy Eklund, executive]

I think it's a representative quarter. I think that I said it before that for us, it's more important to be scalable to make sure that what we're not adding any cost associated with growth. So if we start to add cost per customer that is per business or if we start to add cost per product or cost per user, that will definitely have a negative impact on our margin. So we have more focus on that than actually pressuring the cost levels that we have. So it's not that much focus on cost. It's more about scalability because that is in the phase where we are now, that is more important to us.

[Predrag Savinovic, analyst]

All right. Makes sense. Let's take a few questions from the chat here. The first one is, when will you add a financial partner to factoring that might take off the factoring that for you?

[Tommy Eklund, executive]

We haven't decided that we are going to do that. We have said that we are probably going to do that for our business loans because they are a bit more long term. And that's more like a bank business and we're not a bank. But factoring is a bit different because it's only 30 days. It's short term. It's almost like transactions. And we're using our own money right now and it's only 30 days. So we are using the same money 12 times a year. So it's quite efficient use of money. So we'll see.

We haven't said that we are going to move away from our own balance sheet regarding factoring. We'll see how big it becomes, but I guess we'll find a partner for the business loans eventually. But right now, we have the money. It's quite efficient and the factoring interest rate is roughly 2.5%. So it's 30% annual. So I guess our owners, they also like that we're using their money and have 30% interest on them. So right now, I think it's a good business.

[Predrag Savinovic, analyst]

Okay. When will the Fortnox card be released and how many customers have signed up? And I believe you said in last quarter that it's quite popular at least?

[Tommy Eklund, executive]

Yes. I thought I had my wallet here. I actually am a pilot, so I have it right now, so I can use it, but I didn't bring my wallet. But I have it myself. So I'm one of the pilots. So we're piloting now. We have done that for almost 2 months now. and it looks really good. So sometime early or mid autumn, I would say, sometime late quarter 3, I think it will be released to all customers. So now pilots and then it will be released to friendly customers and then it will be reached to everyone. But I'm using it, and it looks really good and.

[Predrag Savinovic, analyst]

You're happy with it?

[Tommy Eklund, executive]

I'm happy with it.

[Predrag Savinovic, analyst]

How many customers do you pilot with until you feel certain enough?

[Tommy Eklund, executive]

It depends on the complexity of the product. So we have a process where we have -- first, we use it ourselves, and now it's a lot of internal usage because it's a lot of people working here that also have a business. So we're taking advantage of that. And then we have friendly piloting and then we have friendly customers, and then we have certain segments that we think is easier than others. So we can -- with feature flags, we can add different features on these 500 customers. So we can split that in different verticals and all of that.

So it depends on the product. So we'll see how we will do it with the card. But it's something that we do on a regular basis. So that is something that we do on all products. So it's no different than what we do in all other products.

[Predrag Savinovic, analyst]

So so far, you seem happy with this partnership. You have a partnership with Mynt and you have a co-ownership in Mynt as well?

[Tommy Eklund, executive]

We have an option to be a co-owner.

[Predrag Savinovic, analyst]

If someone would speculate you might acquire them at some point, what is your take on those kind of speculations?

[Tommy Eklund, executive]

I haven't heard that, so I don't know.

[Predrag Savinovic, analyst]

Let's move to a free cash flow question then. It looks like free cash flow is growing quite a bit, 275% in this quarter, and there is a working capital improvement. So the question here is if there's been some improvement in the free cash flow from the price optimization between 3 months and 12-month contract. Is there anything contributing there?

[Tommy Eklund, executive]

No, I would say that it's, again, a little bit of everything, but I think the main driver is that we're earning money. That's the main driver. And as I said, profit is growing with 70%. And of course, that has an impact on this. So that's the main driver.

[Predrag Savinovic, analyst]

Okay. You mentioned in the introduction also that you're adding payment rails to invoice services. What are these?

[Tommy Eklund, executive]

We have already now payment rails for consumers. So consumers can pay different payment rails, and we will add more and more payment rails for consumers. I've also said that we're working on business-to-business checkouts and payments for businesses to business. And we haven't had any release dates or anything like that. So I don't want to mention it in dates, but it's in our factory. We're working on it.

It's one of these promising products that we will release and something that our customers are asking for because it's so more -- much more convenient for them if they can do everything in the platform and specialty payments. So that is something that we will add going forward, and we will talk more about it when it's more finished, I would say.

[Predrag Savinovic, analyst]

We have, from our side, notice that the market is concerned about a few things with the general economy, of course, and 1 sector, which is under pressure is, of course, construction. We have had profit warnings in some companies as well due to slower end markets. What is your construction exposure like? Or are you so large it's like the general economy as a whole?

[Tommy Eklund, executive]

I think that if you want to do any or if you want to do your own interpretation, you should look at Fortnox as a small Sweden. So I think that we are exposed to all segments, and we are exposed to construction as well. And it's something that I have reported in the Offerta platform, which is more exposed than other segments that we have.

And the funny thing is there is that, yes, we see that companies are going into bankruptcy. Of course, we can see that. But since it was so much pressure on these companies like 1, 2 years ago, they had too much to do they were not that interested to find new customers. So even if it's -- some of them now are struggling a bit. They also need services like Offerta to get new customers. So it's also a need for more of our services even that some of them are struggling because if you have too much to do you don't pay to get more customers because you cannot handle the customers that you have. So there is also a positive spin that we can feel on the construction segment right now in the marketplace.

[Predrag Savinovic, analyst]

Right. So Offerta is basically countercyclical in this aspect?

[Tommy Eklund, executive]

Yes, in some sense. But then, of course, if there is a downturn in the economy and there is no work to do, of course, eventually, they will go into bankruptcy and eventually, they will cancel their subscription. But right now, it's also a positive thing that they don't have too much to do. They need more customers.

[Predrag Savinovic, analyst]

All right. In terms of the competitive landscape, you have some peers which have been around and are profitable and large and then you have some which are quite small and loss-making. Are you seeing changes in behavior there? I mean you haven't really had competitive threats for quite some time, but is this even easing even further for you now given the economic environment you're seeing?

[Tommy Eklund, executive]

No, I don't see it as a threat. The small companies are often quite fast and agile, and they are seeing things -- so they are more like pushing the market in a good direction that is good for everyone. So I think that all businesses that are delivering software our sector right now. We are helping each other because the market is huge and most of the companies there are not benefiting at all compared to what you can do with software right now.

So I think that everyone working in this area, we're not really competing. We're more like helping each other to explain more if you run a company, you can be even more successful if we were to use these tools. So I think that everyone now in this sector are helping each other to explain the benefits of having a platform like this when you run your business.

[Predrag Savinovic, analyst]

Okay. We noticed you made a summer campaign recently. You're offering some discounts on -- for new customers. if you can explain this initiative a bit? And do you have any expectations on how that can impact the ARPC levels or net customer growth, et cetera?

[Tommy Eklund, executive]

Yes. So that's part of our sales strategy. So it's no change to what we have done before. So we have done that many times before. So it's just part of our sales strategy. So we have different campaigns. And so that's already included in historical ARPC numbers. And of course, it will be included in future ARPC. So that should have no impact.

[Predrag Savinovic, analyst]

Okay. I think on pricing, generally, when we have made a study on how you're priced versus competition. So you have raised, you mentioned price. However, you're still tracking I think you're the lowest price of all vendors still. So should we expect that bucket to drive growth once more, say, a year from now?

[Tommy Eklund, executive]

I think that, that's not the main driver. I said it many, many times before that now with the price increase, it's still roughly 2 products per company or to users using 1 product company. It's still ridiculous low if you have 46 products. So the penetration is still ridiculously slow. So we have so much more to do that. And as I said, overdeliver on our 2025 goals. We just need to add 1 more user per company then we're overdelivering on our own targets. So that's just 1 user per company, and we have 2.5 years.

So we might adjust prices. We might have a better way of pricing our products. I don't know, we'll see if we have a better way of pricing our products we might change, but that's not our focus. The focus is to increase more value and increase usage because we see that in all measurements that we do that the companies that are using more of what we're doing becomes more successful. So it's all about usage, I would say?

[Predrag Savinovic, analyst]

Right. And I expect this is not your main focus, but have you ever considered that Fortnox should be premium priced compared to the market? You don't necessarily have to be the lowest-priced vendor because you -- these value propositions you offer?

[Tommy Eklund, executive]

Again, we're not focusing on that. I think that we can become even better at connecting value with price. So just raising prices because of the sake of it, I don't think that, that is -- that we will not become more successful at that. But I think that we have a lot of times where we're delivering a huge value, but we have not connected that to long-term business model. So I think we can do more with that, and that is something that we will do going forward as well.

[Predrag Savinovic, analyst]

Okay. You said the book even module is 15% to 20% of the revenue. What is the second largest one?

[Tommy Eklund, executive]

Invoicing.

[Predrag Savinovic, analyst]

And how much is that in percentage?

[Tommy Eklund, executive]

I don't know. We'll see.

[Predrag Savinovic, analyst]

Do you have an update on churn levels? Any changes there?

[Tommy Eklund, executive]

No, we're not reporting churn, what I referred to was that in the general market, there is an increased churn, but we have -- we are not reporting churn, and we have no plan to do that in this quarter either.

[Predrag Savinovic, analyst]

Okay. Okay. We have a question here...

[Tommy Eklund, executive]

But I can comment on that if there are new listeners because I've talked about churn many times, we get that question that, of course, we have a natural churn since we have so many companies and companies go into bankruptcy. So we have a natural churn, of course, in the platform. But it's -- but churn to other vendors are slim to none. So we have a reasonably big natural churn, which we have limited impact on. So that's why it's not a big number for us because we have limited impact on that. So of course, churn is always important, but churn to other vendors are slim to none.

[Predrag Savinovic, analyst]

And taking these bankruptcy figures, if we just contextualize those a bit in absolute terms, you had bankruptcies in Sweden in '21, of course, in 2020 and 2022. And I know the percentage rates are up by 30%, 40%. But if we look at the absolute number, it's...

[Tommy Eklund, executive]

Still a small number.

[Predrag Savinovic, analyst]

No, it's about 100 companies to 300, 400. So does it even matter? I mean there's some that say you might be impacted with a lag over time, but is the numbers sufficient enough for you to actually feel it, do you think?

[Tommy Eklund, executive]

No. But as you said, that the 15,000 would probably be a bit higher if we didn't have that. If companies were started in the pace that we did last year and if we didn't have bankruptcies on the level that we have right now, the 15,000 would be a bit higher, I guess. But I think that what you're referring to is that regarding the impact that we have regarding the macro numbers, I think the impact regarding financial activity is higher than the impact that we have on net growing customers.

So because we can see that financial activity is a bit lower than we have planned for. So there are fewer pay slips. There are fewer invoices. And we have revenue connected to those different transactions. And also the financial services are often connected to an invoice because it's the invoice that we're using as an asset to lend money. So financial activity is a bit more important for us than actual than actual bankruptcy.

[Predrag Savinovic, analyst]

Okay. Makes sense. Then there's a question here on when we will see the first acquisition outside of Sweden?

[Tommy Eklund, executive]

Have I said that?

[Predrag Savinovic, analyst]

I don't know. Will you?

[Tommy Eklund, executive]

But it's a good question. But I think I have the same question, the same answer that I have had many times before that our main focus is Sweden, we have a real business, really good business case in Sweden. I don't want to miss out on that opportunity. I want be able to deliver that. So that's my top priority to -- we have just started. We're like a startup. The penetration is still really low. So I don't want to miss out on that opportunity. So that's my top priority.

But we also keep track, of course, of things that are happening outside Sweden. So if it makes sense, we will probably do something outside. But right now, it's not in our plans.

[Predrag Savinovic, analyst]

Which is the fastest-growing module in the core offering?

[Tommy Eklund, executive]

In the core offering right now, I -- that is in the offering invoicing, bookkeeping and payroll. I think it's payroll right now as a single product. That is the one that is growing the most right now.

[Predrag Savinovic, analyst]

I think we should move on to a few questions on artificial intelligence because everyone -- it's a hot topic these days, and you've been talking about this for quite a while. You didn't mention it that much now apart from some uses in the AI bookkeeping service. But I think in terms of the usage around it, it seems to be quite popular. So the pricing strategy on this, it seems like it could be impactful once you decide on it. So how are you thinking here in terms of monetizing that one?

[Tommy Eklund, executive]

I have to come back to that. But I've said it many times before that you never start to use our products based on price because the price is so low. So I mean, if you drive a business and the cost of using a product is like $10 a month, you don't feel that, "Yes, that's really valuable to me when I run my business to use that product but it's not worth $10." You never take a decision based on $10, it's an ERP platform. So that's not an important thing when you decide to use Fortnox. It's all about usage.

So normally, you invest more in just on board in the product and learning the products and all of that. That is a bigger investment than the actual price for it. that's why we think it's quite interesting now that the product is growing in the way that it's done because it's more an especially bookkeeping, which is a reasonable complex product and a reasonable complex area when you're investing time to learn a new product like that because you need to change your behavior, which is much bigger than actually paying $10.

So I cannot communicate or say exactly how the business model would look. I mean, I'm saying that it's probably a lot of value because a lot of customers are now investing their time to learn a new product, even though that is for free now, it's definitely valuable.

[Predrag Savinovic, analyst]

How accurate is it?

[Tommy Eklund, executive]

We're 100% whatever 100% is, but we are 100% certain on the things that we are automatically bookkeeping. So we are sure that we're bookkeeping all the things that we are bookkeeping automatically. But then we also have transactions that we are not sure of. that we give to the accountant saying that these transactions, we're not sure how this is -- often, we have a suggestion.

So we're sending that suggestion to the accountant saying that this transaction, we're not sure how that is going to be bookkeeped. Can you help us with that? And then if that is something that can be rule based in the future, accountant can actually say that, "Okay, in the future, I want these transactions to be booked in this way." So that way, then we're learning more as we go together with the accountants. So it's quite powerful. So as we go now, we will be better and better. But the things that we are bookkeeping automatically, where we are 100% sure that it's correct.

[Predrag Savinovic, analyst]

So you're basically taking a lot of advantage of the behavior that accountants have in your platform?

[Tommy Eklund, executive]

Yes, for sure. And it sounds -- it's their profession. So they're really good at this.

[Predrag Savinovic, analyst]

So handling more and more complex transactions by record at passes, it gets better and better. If we would balance this versus your direct customers and accountants, which one is the one that monetarily is going to benefit you the most, do you think? Is it going to be a more accounting accountant product or an enterprise product?

[Tommy Eklund, executive]

I think everyone is working for the company, so to say. So even the accountants are actually working for their clients. So the real value is, of course, to the account -- to the clients. But then if accountants becomes more and more efficient and they can move from administrative burdens to more give guidance and insights to their clients. So they can -- because you don't only want to have guidance through that.

I think that is -- when you run a company, it's good to talk to someone as well. So I think that we're handling different aspects of running a business. If accountants can move away from their administrative burden and focus on giving help and guidance and insights to the clients, I think that is a really huge benefit for the clients. And if we can also give insights and guidance through data, I think that is also a huge value. So -- but it's different types of value, and I think we need to do it both.

[Predrag Savinovic, analyst]

And then what about the threat coming from AI? Do you see that there could be an opportunity for a smaller business, smaller competitor to utilize some kind of automation tools to get to you?

[Tommy Eklund, executive]

We keep track of it. Of course, I think that if you're going to do really good AI solutions, you need to make sure that you have the right data because that's the base of everything. You need to have structured data. You need to verify that your data is correct. You need to have legal things so that you are allowed to use your data. It's a lot of aspects in around that.

So the easy thing is to train an AI. To have -- to keep control over data is the complex thing. And I think that we're showing now that we have we keep track of the legal aspects. We have a really professional user base with accountants, and we are really good at having a way of storing the data in a structured way. So I think that we're doing the complex things with AI, and you need to start there.

[Predrag Savinovic, analyst]

And also during your presentation, you mentioned a bit on the data. You haven't really started utilizing this fully. There's a lot of it ahead of you. If you could double-click a little bit on what you mean in those aspects in terms of guiding customers how to use the platform both on transactions and modules they should use, how should we think of this opportunity?

[Tommy Eklund, executive]

I think that it's important to understand that as I said, we're quite sure that when we have all the transactions and in the platform, we will be able to do AI bookkeeping. I'm quite sure of that. And when we have AI bookkeeping, then we actually have real-time knowledge on how your company is doing. Of course, we will be able to deliver even more insights than what we have done up until now based on that. but to be able to have all transactions, we need connection to, for instance, banks and IRS and need expense management, which we will get now with the Fortnox card.

So we're keeping track of making sure that we have all the transactions. And then when we have all the transactions, then we're also working with AI bookkeeping. And with AI booking, we're also working with insights. Then you have seen in our Insight product, it's quite powerful already as it is. So I think that, again, the tip of the iceberg here is the insight product, but it's kind of small compared to all the other things that we're doing. All the value is seen in the Insight product but all the work is done with making sure that we get all the transactions. And again, I want to mention that the legal aspects, which are very complex when you're using these -- when you're developing these types of products.

[Predrag Savinovic, analyst]

And it's quite interesting because you are obviously growing very nicely already. You have, obviously, a very healthy margin. But you seem -- you don't seem concerned that your growth trajectory is going to really slow because you have these things. Do you still need to add a few building blocks in them?

[Tommy Eklund, executive]

It's kind of unusual to have a company that this year's R&D investments, which is quite big. You see that we're releasing features every quarter now and new products and all of that. So we have a reasonable big R&D investment this year. That investment has limited impact to this year's revenue and actually limited revenue impact on 2024 as well. So the real pickup will come on the R&D investments that we're doing this year.

So we're quite long term and everyone needs to understand that that's the core of running a software business. We're saying no to, I don't know, at least 90% of the things that we put up there and thinking about doing. And then when we're doing the 10% that we think that this is really the value for our customers, when we're developing that, it takes 2 years before -- so it has an impact and even maybe 4, 5 years.

The Fortnox card that many of our customers are talking about now, which will probably be a popular product since many of our customers are asking for it. It was in the management team 3 years ago. And then we took the decision like 2 years ago. And then we went with Mynt like a year ago, and it will probably take a couple of years before all our customers are using in the Fortnox card. So all of -- it takes time. But that's what we're working on.

[Predrag Savinovic, analyst]

So basically, you're telling us you're managing to grow this fast on product base It's, of course, large, but you have a lot of more stuff coming?

[Tommy Eklund, executive]

Yes. And I think that is crucial for being a company like us that you always need to invest and improve because that's what our customers are asking for us. We always need to be there, developing new stuff and all of that. So we're doing really good now because, as you're saying, we're delivering quite solid in the short-term numbers. we are also investing in the future because one can think that with the margin we have right now that we're pushing margin. But we're not pushing margin. We're investing in things that we would like to pick up '24, '25.

[Predrag Savinovic, analyst]

Okay. And to the audience, we have a few more minutes left on the call. So if you have any final questions, please shoot them. In terms of development then, where are your development where is your development focus currently? You mentioned a lot of things.

[Tommy Eklund, executive]

We cannot mention all the things that we have not communicated, but one of those is, of course, payment, which is kind of a new thing, but also developing, as I said, Insights, we're focusing on that is kind of a new product. AI bookkeeping is definitely something that we're working on. Also, we're rewriting the whole invoicing products. So -- and something that we showed in the product in that we had with the Carnegie.

We also showed that -- we will have a new web interface for -- when you're -- as a consumer receiving invoicing from us. Up until now, you have been receiving invoices in your mailbox. Now you will have a web interface, which will be easier for you to look at the invoicing and store it and all of that, but also payments. So that is something that we're working on. So a lot of new stuff as always.

[Predrag Savinovic, analyst]

Okay. We have 2 final questions then before wrapping up. I'll take them in the same go. The first one, how many customers have registered for the Fortnox card? You didn't really mention that when you spoke about the card. And then when you say payments, is that replicating the Bill.com model?

[Tommy Eklund, executive]

Yes. The first question, no, I cannot communicate how many customers that have registered on the card. Yes, we have similar capabilities at Bill.com. We are not exactly the same company. We are -- we have a couple of more features that Bill.com doesn't have, but in some kind of a broad sense, similar capabilities.

[Predrag Savinovic, analyst]

Okay. And if we just wrap it up with some final remarks from you, what are you spending your time on mostly how you're prioritizing the rest of the year?

[Tommy Eklund, executive]

Prioritization. It's so important that we're doing the right things. If we're making sure that we're always developing the things that holds the most the most value for our customers. That's most more than thing. And it's really complex also. So I think spending the most of the time priority because we have so many opportunities, but we need to make sure that we're choosing the right horses and that we're really going forward. So that's what I'm going to spend my time on.

[Predrag Savinovic, analyst]

Fantastic. Thank you very much for this earnings call. Thank you, everyone, who's listening in.

[Tommy Eklund, executive]

Thank you.

[Predrag Savinovic, analyst]

Thank you.