Fortnox AB

STO:FNOX

Earnings Call Transcript 2024-Q3

[Josefin Ceder, executive]

Good morning, and welcome to the Fortnox Investor Forum. My name is Josefin Ceder, and I will be your host and moderator today. There are 2 guests with me in the studio today, Fortnox Acting CEO, Roger Hartelius; and our former CEO, Tommy Eklund.

This stream will be maximum an hour long. The first part is dedicated to the quarterly results, which will be presented by today's guests. This will be followed by a question-and-answer session.

Watchers have the option to call in and ask a question. Call 0046-8559-31337 and ask your question live after the presentation. That's phone number 0046-8559-31337. We will also display the number during the stream, in case you missed it.

Please be aware that we have only one person manning the phone in the studio, so we appreciate your patience while waiting in line. We will, of course, also read questions from the chat as usual. You can submit your questions there at any point during the stream. Welcome to Fortnox Investor Forum.

The presentation today will, as I said, be divided between our 2 guests. First off is Roger with the financials and then Tommy will present after that with the business highlights from the quarter.

First off, here's Roger Hartelius with 2024's third quarter financial results.

[Roger Hartelius, executive]

Thank you, Josefin. So starting to summarize the quarter, is a stable quarter where all our main KPIs are in line with or better than the same period last year. The customer growth of 13,000 customers is the highest increase of number of customers for the third quarter. The average revenue per customer, where we divide all net sales with the number of customers on a rolling 12 basis increased by SEK 8 compared to last year's SEK 7.

We had a growth of 26% compared to last year's 25%. The operating margin or the EBIT margin amounted to 45%, which is in line with last year and during the quarter we had some one-off costs connected to the changes in executive management team. And excluding those nonrecurring costs, the EBIT margin amounted to 48%. And combined growth and margin, which we call Rule of Fortnox, amounted to 71%, also in line with last year.

So on customers, the positive trend remains. The increase of number of customers was in this quarter, again, higher than the same quarter last year. And at the end of the quarter, we had 585,000 customers and still challenging to reach the 700,000 that we put up in our business plan towards 2025. But the most important for us is the balance between number of customers and the average revenue per customer. And on the average revenue per customer, the ARPC increased with SEK 8 to SEK 293.

And we are still ahead of plan and that's despite the continued macroeconomic headwind. And with net sales of SEK 523 million and an EBIT on SEK 235 million, we show continuous stable development on both net sales and EBIT. The third quarter has some seasonal effects, most clearly seen in the customer activity.

And that's affected transaction-based revenues, mostly. But we also can see it in lower personnel costs. And both are due to the vacation period here in Sweden.

And the Rule of Fortnox that we use to measure how we balance growth and margin, [indiscernible] 71%, which is in line with last year, but excluding those nonrecurring costs, and the Rule of Fortnox amounted to 73%. So the net sales grow with 26% and the highest growth was in lending, where we increased by 43%. And the product there that had the highest growth is when we offered the customers payment directly upon invoicing.

And in total, the growth comes primarily from the existing customers, followed by new customers and to some extent, the price adjustments. And the price adjustment that was carried out earlier this year represents just above 4% of the net sales growth for the period January to September and 7% in this quarter, net sales growth.

So some highlights in the P&L, or income statements. Worth noting is that the nonrecurring costs impact the cost of personnel negatively. And worth noting on the balance sheet is that since Offerta is now becoming a part of the new jointly owned company, Tom Holding, in which Fortnox has 49% ownership, Offerta's assets, liabilities and the group surplus values have been moved to assets held for sale and liabilities related to assets held for sale.

And then the last slide on the financials. Worth noting on the cash flow is that the accounts receivable now decreased to a more normal level since the last day of the quarter did not fall on a weekend. And together with the positive trend on profit, we had a record high free cash flow in Q3.

So to summarize, it's a stable quarter where all our main KPIs are in line with or better than the same period last year.

[Josefin Ceder, executive]

Thank you, Roger, for that presentation. And next up, we have this quarter's business highlights. And with that, I give the word to Tommy Eklund.

[Tommy Eklund, executive]

Thank you, Josefin, and Roger, of course. A stable quarter in a macro environment which is holding us back a bit. So all in all, a stable quarter financially, but as always, we are also heavily investing in the future.

So some highlights from the product and development side. You guys that are following us know that we usually pick up a couple of things from the platform. That is happening, which we call fun facts. So this quarter, we are just announcing that with the ability now for accountants as a starting point to hand in reports. It was actually 15,000 annual reports that were handed in through the Fortnox platform, date in July, which is quite impressive because it's a new product that we just released.

Also, you guys know that we are focusing more and more and doing things automatically. And with that said, of course, it is important to have all the transactions automatically recorded in the platform. And that was actually doubled from the previous quarter in quarter 3 2023. So now we almost had 9 million vouchers automatically recorded during the quarter. So that's an impressive number.

And of course, a lot of efficiency gain for our customers. So a lot of customer value in those 8.6 million vouchers that was automatically booked. And also, we are also working on engaging more people in the platform.

We know that maybe it's not driving revenue directly, but we know that over time it's important with increased usage and increased engagement in the platform. We released the ability to view our insights in the app at the 7th of October this quarter. And since this, we have had more than 30,000 users that have taken advantage of those insights.

So quite impressive numbers during the quarter. And with that said, we also maybe should announce that now insights are available also in the app and that is mainly for companies, directly companies. So as you know, it was released in quarter 1.

It was officially released in quarter 1 for accountants. Now it has been released in the app also for companies to take advantage of our insights, where you can actually, of course, take advantage of things like deviations that you can base your future decisions on. But you can also actually see into the future with the prognosis that we have in the app. So quite impressive things that normally only really big corporates have the ability to have. Now we have that for all companies in the platform.

And also another product that I talked about was annual reports. That was actually just released for accountants before. Now companies can hand in their annual reports on their own into the accounts closing product. So an important feature that we have worked on for quite some time now.

So we're happy to be able to release that. It's a lot of customers that have asked for that. And I also get a lot of questions regarding the expense management product or the business card product.

And it's important to understand that it's not just the business card. It's a full business process with expense management, approvals, bookkeeping and automatically connection to payroll. So now we think that we have delivered with the approval things that we released in after quarter 2. We have the ability to go through accountants with this expense management product. And we'll also release -- this can be work -- this can work without the ability to connect it automatically to our payroll system.

But of course, it will be even more efficient when we also release the ability to pay out things automatically through your payroll system inside this platform. So quite a popular platform. And we have gotten questions, how is the rollout going?

And just to share some numbers regarding the business card. So if you have followed us, you know that we have had kind of a different business model connected to the business card than many other products. So this product has no subscription to it.

So it's free for use. And most other card vendors, as you know, has a subscription model where you pay per card. So this is a really good offer. We give the ability for all our customers to give cards to all their employees. And it's for free. And usage is for free.

So there is no transaction fee for our customers when you're using the card. But we earn 1% on your spend. And I think that now when we have had the card out there for a year, we can see that the spend is quite stable. It's between SEK 10,000 to SEK 15,000. And since we earn 1% on that, it's like SEK 100 to SEK 150, taking into account that we now are up on SEK 293 in the ARPC. Yes, this card, of course, when all customers are using the card, contributes also to the ARPC really good.

And we have a stable growth. As you understand, we think that most of the growth regarding the card will come through accountants. And since we didn't have the ability for accountants to use the card before December, of course, the growth has not been in the pace that we would have liked.

But it's stable growth. And we have now over 5,000 companies that are benefiting the card. And we can see stable growth now month by month. So all in all, a sustainable business model. And it looks quite promising. Thanks.

[Josefin Ceder, executive]

Thank you for that presentation. And we're going to open up for a question-and-answer session. Don't forget, you can call in to ask questions, or you can send in your questions in the chat.

And we're actually going to start with a call today. We have Joachim Gunell from DNB with us.

[Joachim Gunell, analyst]

I hope I get the opportunity to ask more than one. But I'll keep it very, very short. So from an ARR perspective, we saw that this was the first quarter where it was actually sequentially down since you provided that metric in 2018. So I would assume that this is less relevant now that your transaction-based revenues is becoming a larger part of the business. But just help us unpack what this trajectory on ARR means for subscription-based growth going forward. And if this is just a hiccup.

[Roger Hartelius, executive]

We think that the development on the ARR is in line with the increase in subscriptions. So we don't see a big deviation there. We think they are matching.

[Tommy Eklund, executive]

But Joachim, you are right. It's kind of hard to compare now when we're driving growth, both for lending business and for the transaction-based revenue. So it is kind of hard to compare.

And as you know, we also increased prices on the transaction-based revenue more this year than we did last year. And that also has an impact to it. And then we have changed the business model on a couple of products, specifically the payroll product, where we have not moved, but we think that it's a better business model to pay per pay slip than to pay per payroll administrator. And that also has a positive impact on transaction and maybe a negative impact on the ARR.

[Joachim Gunell, analyst]

And you say yourself in the, call it Acting CEO letter here, that bookkeeping is the foundation for so much more. So it's very helpful that you provided this split for the first time with regards to what is driving growth and quantified the pricing elements. So high single-digit product-based or product usage-based growth here in Q3. Can you comment a bit about what is driving that increased product adoption?

[Roger Hartelius, executive]

Nothing specific. We are trying this and this will be one of our main focus going forward as well to get more usage. So we're working with that in the product development, but also in the marketing and everywhere. So that's a big focus for us. So nothing specific.

[Joachim Gunell, analyst]

Okay. And just finally then, we've seen here that you've stepped up your marketing activities. Here in Stockholm, I can see ads in the subway. You're handing out coffee or [indiscernible], et cetera. So just help us with the rationale and timing behind this if this is to trigger further product adoption by putting the stoplight on the fact that you provide so much more than just bookkeeping or is this any indication of a competitive landscape heating up?

[Roger Hartelius, executive]

No, I think you should see more. Yes, we are promoting Fortnox more as a platform, more than just single products. But I think that you see it more since you are in Stockholm. We have made a campaign there to try out to get more knowledge about Fortnox and the platform. But in total, we are almost the same that we have been before. So no big changes in marketing spend.

[Josefin Ceder, executive]

Then on to the chat questions. We haven't gotten a lot so far, so we might be done really early if people aren't going to get going.

But the first question then is, of the 25% growth in Q3, how much of that is pricing? And follow-up question, is it more or less than 5%?

[Roger Hartelius, executive]

I think we answered that on the picture. So from the period January to September, it has roughly 4%, just about 4%. And in the quarter, it was 7% of the net sales growth.

[Josefin Ceder, executive]

All right. Short answer. Don't forget, you can call in to the phone number 0046-8559-31337 if you want to ask your question live like Joachim did a minute ago.

The next question then from the chat is, please could you explain the mix of new subscribers added in terms of the size of their business? Is it 0 to 4 employee businesses, 5 to 9 employee ones, or larger?

[Roger Hartelius, executive]

So we don't see a huge difference between the types of customers. So no, I can't give you any color on that. So we have all types of organizations and all types of company sizes. So it's no direct differences between those.

[Josefin Ceder, executive]

All right.

[Tommy Eklund, executive]

So the demographics in the existing customers, this are not fundamentally changing. That is the important thing. So yes, of course, there are more sole traders because there are more sole traders. But we also have more sole traders as current customers. So we're not fundamentally changing the demographics of the customer base.

[Josefin Ceder, executive]

All right. The next question then is, how are the plans to expand the headquarters going?

[Roger Hartelius, executive]

We're looking into it. We have our headquarters here in Vaxjo and we are growing and we are looking into how to grow in Vaxjo and still have the headquarters here. So no specific plans, but we are looking into it.

[Josefin Ceder, executive]

All right. Then the next question. Other external costs were flat in the quarter compared to the same period last year. This cost line has tended to grow year-on-year. What is driving the flat development in this quarter?

[Roger Hartelius, executive]

So on the question before, one of them is the rental that we're scaling since we haven't increased the rental cost. Another one is marketing there, but also that we are scaling around IT and IT operation. So scaling is the short answer.

[Josefin Ceder, executive]

All right. You look like you have something you want to...

[Tommy Eklund, executive]

No, no, no. I'm fine.

[Josefin Ceder, executive]

All right. Then the next question is, you mentioned ARR headwinds from the Offerta split. Are there any other P&L impacts of Offerta moving out of the continuing operations?

[Roger Hartelius, executive]

Yes, of course it will be, since Offerta has, we haven't had the growth and it has quite low margin. So we will see in next -- no, sorry -- yes, next quarter then, we will see that we will have less revenue, but the P&L effect wouldn't be that much. And in this quarter for the group, since the deal was made on the 1st of October, it's not shown in this report, but some P&L effect, but around, I believe, SEK 10 million that we have already, how to put it, have a decrease, [Foreign Language], depreciation that will be laid back in the Q4. So nothing more than that.

[Josefin Ceder, executive]

All right. The next question then is, the financing asset growth has slowed. Should we expect this -- or should we expect this is the new normal or should we expect a reacceleration in Q4?

[Roger Hartelius, executive]

Sorry, could you...

[Tommy Eklund, executive]

Repeat the [ financial ]?

[Josefin Ceder, executive]

The financing asset growth has slowed. Is this the new normal or will it reaccelerate next quarter?

[Roger Hartelius, executive]

Probably we have lower activity in the Q3, so we expect it to increase in the Q4.

[Josefin Ceder, executive]

All right. And that's it as far as questions go so far. So please submit your questions in the chat, call in. If you need the number again, it is 0046-8559-31337. Otherwise, that will be it. We'll give it maybe a few more minutes to see if people call in.

Otherwise, I guess we'll just sit here and wait. If people don't have questions, I think that's good. It's probably a busy report day. We do have a call. So are you guys ready? In that case, we will welcome Mark from Morgan Stanley into the studio.

[Mark Hyatt, analyst]

I've got a few questions please. Firstly, ARR was impacted by the Offerta deconsolidation. I think that's pretty clear in terms of the impact there. But could you help quantify the impact that this will have roughly on organic growth next year -- next quarter? That's the first question.

Second question is on price. You very helpfully called this out clearly in the presentation. So thank you for that 7% in the first 9 months, 4% in Q3, if I heard that correctly. And could you just tell us what that was in the prior year base for comparison purposes? And then just final question on new customer additions, 13,000 net new, another strong quarter, continuing the trend that we've seen so far this year. Could you just give us a bit more insight into the makeup of these customers?

For example, are you seeing accelerated growth among smaller businesses now you've really built out that offering within that segment? Just anything to try and help us contextualize that given the continued weak macro in Sweden?

[Tommy Eklund, executive]

You can think about Offerta, then I can take the others. So yes, the net adds, yes, it's a healthy growth regarding number of customers. Nothing new. It's what we have reported now many quarters in a row that we are now investing more and more in bringing value, especially to accountants that they should bring all their clients into the platform because that makes them more efficient, so to say. So I think that is what mainly is driving the uplift right now.

Then, of course, yes, as you're referring to, we're becoming better and better also on the offering for small companies. But I will not say that that is the main driver right now. The main driver right now is the accountants use more and more into the platform and see a benefit of having all their clients in the platform and something that we have reported that we are investing in and we can see that happening right now.

And I think that is also why we are quite stable, although we are in a macro environment with headwinds because this doesn't have that much impact because of macro because the clients are already there. So it's not new clients in that sense. It's just that accountants adding all their clients into the platform. So that is, I would say, the main driver right now. Offerta?

[Roger Hartelius, executive]

Yes. So on Offerta, yes, of course, Offerta since 1st of October then the net sales will not be reported as net sales. So the new jointly owned company's result will be reported as financials. And we provided in the report what the annual net sales is for Offerta or has been and we haven't seen that quite stable net sales in Offerta. So that's the way to calculate the effect on Q4. And the other one was price adjustment, right? And...

[Tommy Eklund, executive]

Yes. So, yes. I should have answered that maybe. So yes, the price adjustments that we have done now 3 years in a row, according to our calculations and predictions are pretty much on the same level. Then as you know, it's a lot of moving parts here. So it's kind of hard in detail to verify exactly if it's the same. But according to our calculations, it has had pretty much the same impact now 3 years in a row.

[Roger Hartelius, executive]

Yes.

[Josefin Ceder, executive]

Then back to the chat. We have a question that says, does ARPC include financial services and marketplace revenues?

[Roger Hartelius, executive]

Yes. So the average revenue per customer is net sales divided by the number of subscription customers on a rolling 12-month basis. Yes.

[Josefin Ceder, executive]

Yes. The next question then is, do you have any plans on accelerating your efforts toward large companies? And follow-up question, are there any products you need to develop before attracting larger customers?

[Roger Hartelius, executive]

Yes, we are already accelerating. So -- and we already have larger companies. So we think we have the offer there for those type of customers. And we also have all those integration partners that help us with the specific needs that the large corporation needs. But we are developing all the time, but nothing specific. We already have the offer for them and we are investing in to reach more of the larger companies.

[Tommy Eklund, executive]

Yes. So we think that we have the platform for it and we have had for several years because we're using the platform and many other big listed companies are using the platform, but we didn't have the organization before. And that is what we have invested in now for the last 1 or 2 years, building an organization and a partnership network around that.

And then it's a bit slower compared to our business. So the ramp up, it's a bit slower. But of course, the ARPC opportunity is, of course, bigger also. But you should take into account that it's a bit slower than our current business, so to say. But since the market opportunity is really good, it's worth going for.

[Josefin Ceder, executive]

All right. Then we have another caller or rather we have the same caller again using our open phone line. Joachim Gunell from DNB.

[Joachim Gunell, analyst]

And I mean, I really like that you are, call it, disciplined on cost as evident from your profitability, but you should definitely evaluating investing in a better conference call system, to be frank, but that's another topic for the future. I was just -- I had some follow-ups and since there wasn't that many other callers, I might just take the opportunity. So when it comes to the rate cuts we have seen in Sweden, is this any sort of call it green lights in the dashboard for how your customers think about things?

And also perhaps relating to your financing business, I realized credit losses was below 1% in your 2023 annual report. How is the loan book currently performing in relation to that?

[Roger Hartelius, executive]

So starting with the decreased rate and I think it's too early for us to see it in our dashboards. So no green lights there. I think it will take a while before we see the uplift. On the credit losses, still healthy and really healthy. We believe that we are really good at scoring and credit scoring. So no hiccups or deviations there either. So we are on a healthy low level.

[Joachim Gunell, analyst]

Perfect. And you commented the drag on Offerta on customers in the Q4, but similar to what we saw in a year ago, there was another, call it a freemium player who decided to throw in the towel here and raise pricing. So would you see any sort of -- I mean, do you expect any tailwind in the customer intake from that player canceling out of their free offering?

[Tommy Eklund, executive]

That player was in absolute terms kind of small. So I wouldn't bet on it, but of course it's always good for us when everyone has a sustainable business model in that sense. So it's good for us. It's good for our customers. It's good for everyone in the market. So it's a good change, but then again, you shouldn't read too much into it because it was kind of a small player.

[Joachim Gunell, analyst]

And then just the final question, if you just raise the line of sight a bit here and talk about the more long-term trends. So you're increasing headcount by roughly 20% here year-over-year. Can you just comment a bit on where you are hiring? Is this still very localized in Vaxjo or to what extent is this becoming, call it, more of a challenge to continue to grow in that part of Sweden?

And is that posing any sort of challenges for the corporate culture that has defined Fortnox and then potentially also like cost inflation should you start to expand beyond this footprint?

[Roger Hartelius, executive]

I'll start. Since we have offices both in Malmo, Linkoping, Stockholm, and Vaxjo and that we also worked a lot with employee branding and to have a good culture, we don't see any big threats there. And on the hiring, mostly on product development, but also, of course, customer support.

But we are really digital, so we can work from all our offices. And so, yes, no changes there in the future. So I think you will see almost the same [ correlance ] with the net sales and number of employees as you've seen before, except that we will keep on scaling, of course.

[Tommy Eklund, executive]

And regarding the 20% that you referred to was the year before and that didn't include Boardeaser. So of course, that also has an impact on the 20% that you referred to. And Boardeaser sits in Linkoping and Stockholm, if you're asking about cities.

[Joachim Gunell, analyst]

Lovely. And on the corporate culture side, is there anything that, I mean, Fortnox is an entirely different company than when you joined, Tommy. And then you also highlighted that a bit in the press release when you decided to take the next step. So would you say, to any sense, that it is hard to retain the corporate culture as you are growing and scaling in the fashion that you currently is?

[Tommy Eklund, executive]

I think that we have managed to do that. Of course, we were in a sensitive phase where we were 100, 200 people, where you almost knew everyone by name. We have taken that step now to being an enterprise company and being able to keep the culture that made us possible.

But of course, it's kind of hard for one person to know 900 names. So in that sense, of course, we have left some parts of this family structure. But I think that all 900 still thinks that it is a family, although you're not knowing everyone.

So I think that we have managed to do that. And I think also what is driving the culture is, of course, our vision. You come into Fortnox with a vision to improve business life in Sweden and we have almost now 600,000 businesses in the platform.

So when you are doing really good work here, you are actually improving business life in Sweden. That's for real. So many other companies have a vision that is written by a communication department that no one knows about.

But this is really the DNA of Fortnox. We're coming to work here to improve business life in Sweden. And I think that is something that is driving everyone here. And that is also driving the culture, I think.

[Josefin Ceder, executive]

All right. We're going to go back to the chat then. Given that the 2025 customer target looks very unlikely to be achieved, but the ARPC will be exceeded and that the company seems to be running itself on the basis, why don't you reset the targets?

[Roger Hartelius, executive]

So, well, we have a 5-year business plan and we think we are delivering on it. So no need for changes. And as I said before, I think it is the balance between the number of customers and the average revenue per customer. And it's right, we are focusing more and more on usage. So the average revenue per customer is becoming more important for us. And we will, during the next year, make the new plan for 2030. So yes, let's come back then with new targets.

[Tommy Eklund, executive]

And it's kind of ridiculous if you set out targets there and then change them for every outcome, they are targets that we're going for.

[Josefin Ceder, executive]

Then we have another call that's ready. So with that, we're going to welcome Erik Lindholm-Rojestal from SEB into the studio.

[Erik Lindholm-Rojestal, analyst]

I have some issues with calling in here. And I was listening to another conference call, so I might have missed some details. But I'll start off with a boring housekeeping questions before moving on to the exciting stuff. So other external expenses were flat here year-over-year. Is there any reason in particular why this is not growing in line with revenues? Any savings that you made? I'll come back with another question.

[Roger Hartelius, executive]

I mentioned it before, it's connected to scaling, as for example, rentals and the offices, IT operation. So it's more of scaling. So nothing particular, more scaling possibility as for, yes.

[Erik Lindholm-Rojestal, analyst]

All right. Sounds good. And then, at CMD you talked about the launch of your payment product and also the AI product, I believe it's called Freya. How is that progressing? Is that coming out now towards the end of the year or is it more of a 2025 thing?

[Tommy Eklund, executive]

Yes. So if we start with the AI assistant, then you should not think that that is the only AI thing that we do because we have 50 development teams and all of them, I would say, are using AI one way or another. And then some teams are using it more than others, but it's all over, so to say.

But you're right. We are also working on our own AI assistant. We have not communicated a release date, but everything looks really promising. We have both our own hardware and we have our own model for building these machine learning models. So all-in-all, I think that we have the right strategy here. It looks promising.

We will come back to the release late, but it will be an AI assistant that knows everything about how to run a business in Sweden, also know everything about that we know through data in the platform and also knows everything about your data, your company, and an assistant that can also do everything in the platform that you can do through the normal user experience, so to say.

So quite powerful, but again, you shouldn't read too much into it regarding revenue because it has not been released yet. So I think, as always with Fortnox platform, the beauty of the platform is that it's kind of slow, because it's happening all over. So you should not expect revenue pickup in the near future. But in the long run, of course, that is a game-changer.

And regarding the payment product, we just left the pilot period. So now we're rolling out that product not in the pilot phase anymore. We'll see about the official release date, but also product that looks quite promising for you that don't know what it is. It's the ability to actually pay supplier invoices, pay slips and tax directly in the platform with different payment rails.

So you can pay these things with different payment rails in the platform. So a lot of user experience improvement with that, because nowadays, you can almost do that in the platform, because you're taking all your supplier invoices and you're pushing pay, but you still need to go into your internet back and do the payment. And of course, that is kind of cumbersome when you are a user.

So I think it's a lot of customer value there and we will come back with the business model around that when or after we have released it to the market.

[Erik Lindholm-Rojestal, analyst]

Excellent. Sounds promising. I'll just end with a final question. I know you don't guide for growth next year. But I mean, if we think about the puts and takes into next year and in this year, you've done some price increases, driving around 4% growth, I believe you said and usage growth is sort of the main driver. But still, it's a weak macro environment. And then how should we think about growing -- growth going into next year? It is -- I mean, in a stronger macro environment, would you see this sort of accelerated growth all else equal?

[Tommy Eklund, executive]

Yes, as we're not guiding, so I guess we should not start to do that now either. So -- but the only thing that we can say regarding macro, yes, it's holding us back a bit now. And it has been doing that for over a year right now. So that is the only thing that we can clearly communicate. Then exactly what will happen next year, we'll see.

[Josefin Ceder, executive]

Thank you. And then we're going back to chat questions for a little bit. Could you elaborate on the nonrecurring cost of SEK 13 million on the one-off staff cost? What is the driver behind that?

[Roger Hartelius, executive]

Yes, so we have 2 persons in executive group management that, yes, but left in Q3. So that's the sum of those changes.

[Josefin Ceder, executive]

All right. Then the next question is, as you focus more and more on price optimization over time, should we expect that price action going forward will be more than historically or the same?

[Roger Hartelius, executive]

Yes. So when we're talking about price optimization, it's also that we want to connect it more to the usage or the benefits of the platform. So be smarter in the pricing.

So as you asked questions before about larger corporations, so today we have not optimized the price model to have the larger and the smallest ones. Since we have almost every type of organization, we will try to work with, yes, pricing that fits the type of user or the type of customer. So that's what we're working on with the price optimization.

[Josefin Ceder, executive]

All right. One more chat question that I think will be pretty fast before we have another caller is how is the CEO search progressing with 2, both former and current CEOs in the room? This is an interesting question. Do you have any update on timing?

[Roger Hartelius, executive]

No update on timing. The Board are working, are in the process. That's the update we have.

[Josefin Ceder, executive]

All right. Short answer as I expected. Then we have a caller ready. We have Predrag Savinovic from Carnegie with us in the room, hopefully.

[Predrag Savinovic, analyst]

I just want to start with a clarification question on ARR, because there's been some debates whether it's declining in sequential or not, but if we adjust Offerta from the previous calculations, it looks like ARR is in fact growing nicely quarter-over-quarter. Is this the right way to see it, do you think?

[Roger Hartelius, executive]

Yes, we believe that it's correlated to the subscription revenues. Yes.

[Predrag Savinovic, analyst]

All right. Good. Then I would like to just touch on a different debate because there's been some discussions in the financial markets around negative points on Fortnox. So if we could take those questions as well. I think the first one I want to ask is some people have claimed that Fortnox is underinvested. There's technical debt, which is not my impression, but I would like to hear your answers to if the platform requires significant upgrades in the coming years, that can impact profit margins and so on?

[Tommy Eklund, executive]

Now of course, I'm kind of biased, but I would definitely not say that. I have been working at many software companies and I have looked into many software companies. I haven't seen a single company that is investing as much in the future as we are doing.

So most of the investments that we're doing are not driving revenue this year or even next year. So I think that we are still heavily investing in the future. I would say we have 50 development teams that are working on the platform every day and we are able to attract really, really good developers also.

So we are also really good at doing development. So we are a tech company. That's our core. We are best at tech. So I would say that, no, that's definitely not our interpretation on the inside.

[Predrag Savinovic, analyst]

That's very clear. That's my impression as well. If we can move on to some growth drivers then and I respect you don't give guidance, but if you could maybe reason a little bit around continued customer growth, is it more challenging or is it status quo similar as before? What do you think of the penetration levels on the existing platform and portfolio currently have, new product launches for the next 2 to 3 years from here?

[Tommy Eklund, executive]

We're not guiding, but again, I think it's quite obvious that we're keeping up net adds and we have said that we have invested in both our channels, both the indirect channel through accountants and our own website. And I think that is seen by the numbers, being able to go from 10,000 to 13,000 increase in net adds in the quarter 3 where many companies are actually struggling, that's quite impressive.

And I think that we're showing that we are a solid platform that is improving our net adds. Then of course, as Roger is referring to, the 700,000, it's quite aggressive and we probably need some help in the macro environment. If we continue to be in the recession state that we are now, it will be maybe too challenging, but we have a plan to get us there. So we have not given up on that. So we think that we can reach that again with some help with macro, I think. And regarding the up sales what is driving growth?

We have said that during this business plan period, 50% of the growth comes from existing customers and -- roughly, of course, and 50% comes from new customers. That of course, over time will change. And I think that is what Roger also showed us in his numbers now, that the upselling capabilities are driving more growth now than new customers. And I guess over time, of course, it's kind of obvious that that will continue in that direction.

[Predrag Savinovic, analyst]

That's very clear. And then just a question also on the Fortnox card and I appreciate the stats you shared with us. We also noticed that you started including it with most of your packages. What is a reasonable penetration level do you think over time for this product? I mean, it's free access and free to use. So should it be very high mid-teens? What should we think of in terms of potential when it comes to penetration?

[Tommy Eklund, executive]

I guess a reasonable number would be 100%, because it's for free. And it's a really good product. So why shouldn't you use it?

[Josefin Ceder, executive]

All right. Then the next question is intangible capitalization was only SEK 35 million in Q3, which is a slowdown from quarter 1 and 2. What are the drivers behind that?

[Roger Hartelius, executive]

And that's the same as the seasonal effects that I talked about. We have the vacation period in Q3, so lower -- fewer worked hours. That's the reason behind, yes.

[Josefin Ceder, executive]

Yes. And the next question is the opening of the Stockholm office seems to have gone well. How do you see this affecting staff costs going forward?

[Roger Hartelius, executive]

Nothing. We had 2 offices in Stockholm before, since we bought Capcito and Offerta. And now we moved to a Fortnox office. So yes, no changes.

[Josefin Ceder, executive]

All right. The next question then is can you share some more comments on the development of accounts receivable and deferred income in the quarter? And how should one think about the implications on revenue growth?

[Roger Hartelius, executive]

So 2 questions there. We had a decrease in accounts receivable and that's due to that the last day of the quarter did not fall on a weekend as it had done the year earlier quarter and also the 2 quarters, quarter 1 and quarter 2. So just depending on what day the last day of the quarter is. So we get the money from the customers and that affected the accounts receivable and made a positive cash flow. I didn't get the second one.

[Josefin Ceder, executive]

How should one think about the implications of this on revenue growth?

[Roger Hartelius, executive]

So I don't see any implications on revenue growth connected to that. So it was just the effect of the last day did not fall on a weekend, yes.

[Josefin Ceder, executive]

Then we have one more question before we will take another caller. And that is what are your USPs compared to competitors when attracting larger customers? Would you say it's mostly price or user experience? Can you talk a little bit about your price compared to others?

[Roger Hartelius, executive]

Yes.

[Tommy Eklund, executive]

Yes, of course. Yes, we are on a ridiculous low price level, but that's also connected to what Roger is referring to that we actually don't have a price model for that segment yet.

So I think that will come now that we're going more for that segment as well, because I think actually that segment would like to pay more so that they are sure that they're buying quality, so to say. But regarding features and what we think the platform is good for, the platform is compared to other platforms, very flexible, very open, very easy to use. So you can cherry pick, you can pick whatever.

So yes, you can use our bookkeeping, but maybe you want a time reporting from another platform, then you can buy that in the app store. So you can cherry pick and take the best of breeds of everything that you need. And I think that is kind of unique when a really big software vendor comes into an enterprise deal, they say that you need to buy everything from us.

We're saying that utilize the platform and take whatever you need. Sometimes our products are really good, but you also have a bunch of different other choices in the app market. And it's an open platform, so you can also develop and integrate your own develop system, which many of these bigger companies actually have. So all in all, I think that is a major difference compared to many of the other vendors in that segment, so to say.

[Josefin Ceder, executive]

All right. Then we're going to take our caller. We have Simon Granath from ABG on the line.

[Simon Granath, analyst]

Initially, a big topic in my view is that customer growth in percentage terms has slowed in recent years, while the ARPC growth has accelerated and become more important. And regarding the latter here, we know that there is a tailwind from customers migrating from non-interactive clients into interactive such. Could you talk about the long-term momentum here and how, if so, you may speed up that process?

[Tommy Eklund, executive]

I think, yes, that is seen in the numbers. I don't think that you should have that as the single reason for that happening. So I think, as always, it's a little bit of everything in the platform.

But you are right. We're becoming better and better at explaining to companies why they should be more active in the platform. And we are also developing more. So we're spending more and more R&D also for that reason. So we talk -- we can take any take the card, for instance. You cannot be using the card if you're not active in the platform.

So that's, we have the business mailbox. You cannot get your formal mail into your company as an entrepreneur without being active in the platform. You need to onboard yourself. So -- and when you're doing that, I think that that is also a reason for you being more active in the platform, because you need that first push to log into the platform. And then you see, "Oh, can I do this in the platform?" I get all these insights.

I can do this digital instead of doing it manually. So I think we need to push that first step and then it's happening out of itself. So -- but more and more of the R&D investments are actually addressing that because it's not just that first ARPC uplift, it's a tailwind of everything that happens afterwards also.

[Simon Granath, analyst]

It's a very good answer. And then I have a follow-up on the corporate card. Have you seen any changes in the market sentiment around the general adoption of expense management products in light of the recent legislation changes that were implemented as of 1st July this year?

[Tommy Eklund, executive]

No uplift in that sense, but yes, it's growing better and better every month now, but it's probably not connected to that. It's because more and more of our customers knows about the product, I think. So it's more connected to that, I think.

[Josefin Ceder, executive]

We have a few more questions. We're starting to get to the end of this hour. So we'll see. We should have time for all of them. We'll see if there's another caller coming in.

The next question then is organic growth is the trending softer. The organic growth is trending softer. At the same time, you have a strong customer addition. What is driving the softer organic growth?

[Tommy Eklund, executive]

It's actually a recession, I would say. That's the only single explanation that we can have. We were in a recession last year when we went from like 30%, 35% growth to 25%.

And that was mainly connected to recession. And now, yes, my gut feeling is that the recession, the macro environment is even tougher this year than last year. And then to be able to keep up almost the same organic growth as we did last year, although we are in a tougher macro environment, I think it's quite impressive to be honest.

[Josefin Ceder, executive]

Yes. The next question then is, would you expect that the drive behind price optimization will lead to a larger annual impact on revenue growth from pricing than the 4% you've done historically in the coming years?

[Roger Hartelius, executive]

It's a tricky one.

[Josefin Ceder, executive]

It's a long question.

[Tommy Eklund, executive]

Hopefully. So it's not our main driver, because it's kind of obvious with our low price point that we can easily just raise prices if we want. It has not been our main driver for growth.

But we also know, since the platform has grown so much with so many customers, with more products, we also know that we are somewhat a bit pricey on certain things for certain customers. But we are also ridiculous low on price for certain customers and for certain products. So with that said, I think that we can substantially raise prices in the platform without impacting customers at all.

They will feel that, yes, this is obvious that it should cost more or this should cost less. So the sum of that, yes, I think that will have a bigger impact going forward than what it have had historically. But it's not traditional price raising.

It's more about price optimization, working more with the business model in the platform. So that is not something that we have focused on historically. We have developed really good products with easy to use products that is helping customers to improve their business. That has been the driver. So we have not focused that much on that. But I think that it's something that we can do going forward, so.

[Josefin Ceder, executive]

All right. Then the next question is, how important will a new CEO be in terms of setting the next 5-year targets?

[Roger Hartelius, executive]

It's hard to say, but we believe that we have a company, we have a vision that is stable, that we are 900 employees and we have a group management team that are close and driving this. So probably not that important, I would say.

[Tommy Eklund, executive]

And since we are so long term in our investment, most of the investment that we're doing right now has not the purpose to drive revenue this year or even next year. So many of the investments that the management team have decided on has growth drivers 2, 3, 4 years in the future. So we are already in that business plan with the investments that we're doing now.

[Josefin Ceder, executive]

All right. We've now closed our phone line for those wondering about that. We have another 3 minutes or so to go. So if you have a last question, you can throw it in the chat and we'll answer as many as we can. The last question as of now is you've added net 140 new employees this year-to-date. How do you think about hiring going forward? Is a couple hundred hires per year a reasonable assumption?

[Roger Hartelius, executive]

So what I'm mentioning in those is that we also acquired a company, so it's included in those numbers. But if you look historically, we have had almost the same hiring rate connected to our growth. So I would expect that it will have this similar pattern going forward.

[Josefin Ceder, executive]

All right. Thank you. That's it for today. We haven't gotten any last minute questions in this last minute or so. So that's all we're going to talk about today. Thank you to our Acting CEO, Roger Hartelius.

Thank you to our former CEO, Tommy Eklund. And of course, thank you to all of you watching. That's it for today. And thank you.

[Tommy Eklund, executive]

Thank you.