Fortnox AB

STO:FNOX

Earnings Call Analysis

Fortnox Delivers Strong Growth Despite Headwinds

Fortnox presented a strong quarter with customer growth and net revenue increasing, despite economic headwinds in Sweden. The customer base expanded by 16,000, average revenue per customer went up by SEK 8 per month, and EBIT (Earnings Before Interest and Taxes) grew nearly 50%. They continue to exceed their 'Rule of 40' target, which implies the sum of EBIT and growth rate should surpass 40%, actually achieving near 70%. The introduction of their new business card, which offers 1% on transactions and helps real-time tracking for AI-enhanced services like bookkeeping and credit scoring, has been well-received though not significantly revenue-affecting yet. Investments in hiring shifted from external consultants to internal teams, improving R&D. The loan book within the factoring business indicates declining credit losses due to enhanced real-time credit scoring. SaaS-based revenue and transaction-based revenue streams remain optimized without targeting a particular stream for growth.

A Stable Quarter Despite Economic Headwinds

Once again, the company has delivered a solid quarter, adding 16,000 customers and experiencing an ARPC (Average Revenue Per Customer) increase of SEK 8 per month per organization. Revenue growth has trended upwards from 25% in the previous quarter to 26%, displaying resilience in the face of economic challenges like a recession in Sweden. The company's performance aligns well with its ambitious five-year plan aiming for 700,000 customers and an ARPC exceeding SEK 300 per customer per month.

Financial Performance and Scalability on Display

Financially, the quarter was robust, highlighted by substantial earnings growth, with EBIT (Earnings Before Interest and Taxes) increasing nearly 50%. This performance exemplifies effective scalability and surpasses the 'Rule of 40' benchmark for SaaS (Software as a Service) companies, a measure that suggests companies should aim for combined growth and EBIT exceeding 40%. The company sets a higher internal benchmark aiming to exceed 60 annually and has been consistently delivering close to 70 for several quarters.

Product and Business Highlights

Focused on long-term value, the company is investing in enhancing its insights and guidance products, an area seen as a primary value driver for customers. They have recently integrated this offering into their digital product line for accountants. Additionally, in partnership with SEB, they have streamlined the process of creating a company with a business account in Sweden, making it quicker and more efficient. With the aim to oversee all the transactions, the company launched a card product, allowing for the real-time tracking of transactions and connected documents, thereby offering a comprehensive payment solution within their platform.

Yearly Earnings and Product Evolution

The year started with considerable success, with EBIT growing 57% in the first quarter and the business area 'Pengar' reaching breakeven ahead of schedule. The second quarter saw the company exceed 500,000 customers while the average revenue reached SEK 250 per organization per month. By the third quarter, they achieved a substantial EBIT margin, the second largest in company history. Over the course of the year, despite fewer new companies being established and increased bankruptcy rates in Sweden, customer numbers grew by 56,000.

Strides in Innovation and Market Presence

In 2023, the company has consistently introduced a new app to its market every third day, showcasing its commitment to continual innovation. The Fortnox app is now among the top 6 business apps in Sweden and the company received over 7,000 job applications over the year, indicating its growing market presence and reinforcing its vision of helping Swedish companies succeed.

Earnings Call Transcript 2023-Q4

[Erik Lindholm-Rojestal, analyst]

Hi, everyone, and welcome to Fortnox' Q4 2023 Investor Forum. My name is Erik Lindholm-Rojestal and I'm an equity research analyst at SEB covering Fortnox. With me here today live from the studio in Växjö, I have the pleasure of having the CEO of Fortnox, Tommy Eklund. We will start this session with a presentation from Tommy, which will be followed up by a Q&A session. If you have any questions, please put them in the chat. With that said, please take it away, Tommy.

[Tommy Eklund, executive]

Thank you, Erik. So I guess I'll keep it kind of short so that we focus on Q&A, as we normally do. So, for you who follow Fortnox, you've seen this before. This is the way that we communicate headlines regarding the quarterly reports.

So I would say, again, a stable quarter. So net growing with 16,000 customers, increased use of our products. So SEK 8 more per month and organization in the quarter. So both numbers quite solid. And also, you can see that we're picking up a bit. So although we are -- we have some macro headwinds and it's a recession in Sweden, we are actually trending now in a more positive direction than what we did in quarter 3. And that goes for both the net revenue and the net growing of customers, so going up from 25% in Q3, now it's 26%. So I'm quite proud of that we -- even though that we are in this macro headwinds that we're in, we're managing to turn the trend, so to say. And as always nowadays, we're showing scalability. So that's -- so with that, we also have a healthy margin in the quarter.

Yes. And if you put these customers net growing and ARPC, which is average revenue per customer and month, if you put that in a historical context, you can see that there is no -- nothing that is standing out with these numbers more than it's we're trending quite good. And as you know, we're -- this is also connected to our 5-year goals, which is 700,000 customers and exceeding SEK 300 per month end customer. So I think that we're trading according to our plan, at least on customers, and the ARPC is a bit above our expectations. But anyway, I think that we're trending in the right direction to reach our 5-year targets.

Financial performance. As I said, the net revenue is picking up compared to quarter 3. So we're quite satisfied with that and with scalability. Of course, we are also showing a quite good EBIT growth, almost 50% EBIT growth in the quarter. So yes, financially, a really good quarter in all aspects.

Yes. And this is something that we're also following internally. So we're not guiding on this. This is the international definition of how you're measuring SaaS companies, which is the Rule of 40. So when you're adding EBIT and growth, it should exceed 40 ] when you are a good company. We have our own definition of that. So we internally are aiming to exceed 60 on an annual basis, which is a massive number in all aspects, and now we have delivering close to 70 now for many quarters in a row. So all in all, a really good quarter both on the EBIT level and on the growth level. And when you're combining them, I think that we're showing that we're quite stable here.

And as always, a couple of business and product highlights from the quarter which may be of interest. So I guess you know that insights and guidance is probably the most important area for us long term. So it's something that we're investing in. We think that, that's the biggest value that we, over time, will be able to give back to our customers. If we can for real give them guidance and assistance on what they should do to improve their business, that's really valuable. So that's what we're investing in. And what we have done during the quarter now is that to move -- also move our insight product into the product that is developed for accounting firms, which is digital accountants. We have a specific product only addressing accountants where you can -- it's like a workflow management system for clients. So in that product, you can handle a lot of clients at the same time.

Now we have also included our insighting product in that product for accountants so that we can give the ability for accountants also to help entrepreneurs on what they should do to improve their business.

Yes. So even though that we have, together with certain authorities here in Sweden, improved the ability of creating a company in our business Lagerbolag, so that is something that we have done, it has still been cumbersome to get a business account in Sweden. So that could have taken many weeks or even months, so that has been kind of annoying for us. So that is something that we have solved now together with SEB.

So now you can, together with our business Lagerbolag, where you can go in and start the company within 2 hours or even 45 minutes, if you extra. Now that is connected so that you have also digital boarding with SEB so that you can for real now create a company also with your business account almost in real time. So it's a really good cooperation with SEB there.

Yes. And you know that we're capturing more and more payment rails now in the platform. So this is also an example now where we have introduced the ability to pay invoices. Especially focusing, I would say, consumers, but small companies almost act like consumers. So this will also address small companies. When you are self-employed, for instance, you almost run your business as a private person. So this is addressing consumers but also really small companies, where we're helping them in an easy way to pay invoices that is distributed by our customers.

And of course, you have abilities like switch payments, pay later and all of the things that you can expect from a checkout we have now developed so that we can offer our customers' customers a better way of paying invoices.

Yes. And of course, the app becomes better and better and also becomes more and more important. So nowadays, it's actually more than 50% of our customers that are using the app on a monthly basis and it's increasing all the time. So with that, we're investing more and more in the app. So we see that more and more entrepreneurs are now driving their business inside the app, so to say. So this is just a reminder that we're adding more and more features to the app and where that is also something that our customers like and they're using it more and more. So the app becomes more and more important now quarter-by-quarter.

Yes. And I promised you guys some kind of update on the Business Card because it was a lot of questions during the quarter 3 report. But since it was just released like one week earlier before the quarterly report, I said that let's save those questions and then we can have a couple of insights regarding the card. And it has been a positive feedback on the card, so it looks really promising.

The main reason for us to do this is because we're equipping our customers with the ability to pay everything that you need to pay when you run a company. So you know that we're working on a payment product inside the Fortnox platform where you can pay out salaries, you can pay supplier invoices, you can pay through a tax authority. So that you can easily, inside the Fortnox platform, pay for everything that you need to pay, but we haven't equipped our customers with the ability to pay for other expenses. So that's why we released the card so that with the card, we have a full-blown solution where you can inside with Fortnox products pay everything that you need to pay when you run a company.

So that's one of the most -- one of the reasons for releasing the card, but it's also transactions. So with the card, we will also be able to track transactions and documents connected to the transaction in real time, something that we didn't have the ability to do before. We already have that ability with pay slips and supplier invoices and everything else that you do inside the Fortnox platform, but we needed a card to also capture all expenses and all the transactions connected to the expenses and all the documents connected to those transactions.

So with those abilities, we have the ability to follow your company in real time. And with that, we're adding AI bookkeeping, AI insights, real-time credit scoring. All the different values that we're now adding to our entrepreneurs is based on that we have real-time knowledge of what is happening in your company.

So this is kind of the last piece in the puzzle to make that complete. And we remove all the different hurdles on -- to use the card because it's so important for us. So we have removed all fees. So it doesn't cost anything for our customers, and you can give it to all your employees. So there is no subscription cost for the card and the usage is for free. So you can use -- you can get a virtual or plastic card to all your employees and they can use it for free, and you just take a picture on the receipt and that is connected to our AI bookkeeping capabilities. So that is automatically bookkeeped. Everything, that is for free. And then we earn 1% on all your transactions, and we also earned 50% on any credit earnings. But that is only if you pay late. So I think that the model is more connected to that transaction fee that we have.

We have started to launch this -- yes, everyone can use it, but we have not, on purpose, released it to the accounting firms yet because if a bigger accounting firm should start to use this in full blown, they need a more complicated or more advanced approval processes. So that is something that we have worked on and that would be released later in quarter 1 or quarter 2. So we have not launched it to the accounting firms yet. So -- but all in all, a good release up until now.

Yes. I guess I'm not going to spend that much on 2023 because this is old news, and I guess it's better to focus on Q&A. But just a few words on each quarter, and this presentation is of course published on our web page, so you can go in and read it for yourself.

But just a couple of headlines. For instance, we started the year quite good with an EBIT growth of 57% in quarter 1. And we also managed to take our business area, Pengar, which is one of the areas where we're investing in quite a lot. We actually -- we said that we are going to go into profit during the year, and we broke even already in quarter 1, so that was ahead of our own plans. So that was quite good for the future. And of course, a lot of other releases during each quarter.

Quarter 2, we passed a couple of interesting milestones. So that was the quarter where we exceeded 500,000 customers. So that's 500,000 organizations that are in the platform right now, quite a massive number. And with that, also, we exceeded SEK 250. So that means that in average, all those organizations are paying now SEK 200 or they paid in quarter 2, SEK 250 per month an organization.

And again, a lot of new things happen. KYC and AML becomes more and more important to us and our customers and especially accounting firms and banks and all of that. So we also launched or published a new cooperation with Norwegian companies to introduce that as a product to especially focus on accounting firms for KYC.

Quarter 3, we have a seasonal impact connected to EBIT. So that actually -- so that means that the EBIT level was quite strong actually, the second biggest EBIT margin that we have had. So a quite solid quarter 3, and also the Business Card that I talked about was launched during that quarter. And you know that we're also aiming to go for -- to also offer value over time for bigger and bigger companies, which then you normally need consolidation and group features. So that's why we also have a cooperation, and with that, we have released a new product, which is called Fortnox Group, so that we also have the capability to offer value to companies that are working on group level.

Yes. So all in all, we're never satisfied at Fortnox. That's not in our DNA, but to deliver almost 30% organic growth and exceeding 40% EBIT in a recession, I guess it's -- you have to be proud of the people working at Fortnox. So there are definitely headwinds in the macro environment. But I think that we're doing it still quite good. And also, I'm really satisfied with that we increased with 56,000 companies when there are fewer started companies in Sweden, and we also have bankruptcies and all of that. So despite all the headwinds, during 2023, we still increased with 56,000 customers.

So we're closing a quite solid year, although we have some headwinds. And yes, for you guys that have heard me before, you know that I normally pick up a couple of fun facts during each quarter. So this is -- so now we have done that for the full year instead. So this is just a couple of things that is quite telling of the platform that we have.

So nowadays, every third day, there is a new app in the app market. So quite impressive that every third day for the full year 2023, we're adding a new app in the app market. And as I said, we are investing in our app, and that is also seen by the usage and all the feedback and all the different usage of the app. Now we can see that it's actually top 6 of all business apps in Sweden now. And of course, we're aiming to be #1, but we're already now on top 6, which is a quite impressive number.

More and more people are also looking to be part of Fortnox. So in 2023, there were more than 7,000 job applications, which we hired about 150. So it's quite hard to get the job here, but more and more people would like to join us and help companies to improve. So I think that our vision on -- we are here to make companies more successful in Sweden. I think more and more are seeing the value in that.

And you have seen that our invoicing service product becomes more and more important to our customers, and the penetration of that is increasing all the time. One day in December, we actually received more than 50,000 -- 57,000 payments in one day, which was bookkeeped all the weight and also distributed back to our customers. So everything was automatically done, and it was down 57,000 times in one day in December, quite a massive number.

And I've said it many times, we're still just a start-up. So we have many, many more things to achieve. And I think that is also seen with all the number of updates that we're doing in the platform. So we've done 700,145 new updates of our platform only last year. So we're continuing to deliver more and more value to our customers. So I think that's closing the 2023 targets.

And just before the Q&A, a save the date thing. Of course, there will be invitations to all of you later, but you can save the date, we will have a small business update on the 23rd of May this year, so that where we will give you an update on where we are heading and where we are in the 2025 business plan. So this was just a save the date, but the invitations will be distributed to you guys later.

[Erik Lindholm-Rojestal, analyst]

Perfect. Thank you for that, Tommy, and looking forward to the Capital Markets Day. All right. But I thought we could start a bit on the quarter, perhaps. So to start with, I mean solid ARPC growth in the quarter, 12% year-over-year. I mean is it -- I know you're still benefiting from maybe the price hikes you did at the start of the year in this number. But is it possible to maybe break this up a bit into sort of price and product per user or upselling?

[Tommy Eklund, executive]

I think that, as always, in Fortnox, it's a little bit of everything, and that's also what becomes quite stable in the numbers because we're not dependent on just one thing. So all the segments are growing according to expectation, I guess, and that is contributing to the ARPC, since the ARPC is net revenue divided with number of customers. So it's -- we're growing everywhere. And then you should also know that ARPC is -- since we're delivering quite good regarding net number of customers, that is actually pushing back the ARPC since it's net revenue divided with a number of customers. And now we're delivering maybe even better than our own expectations regarding net number of customers, and that is pressuring the ARPC.

So with that, yes, the ARPC is a solid number. But we can never do that with just one thing, and it's not just only price increases, and it's just not one thing. It's -- the money segment is growing really good, for instance. And of course, that contributes to ARPC because the customers that are benefiting from the financial services are on a much higher ARPC. So although that the penetration is still kind of low compared to 540,000 customers, those customers that are benefiting from those financial services are definitely contributing to the ARPC because if you're, for instance, using our factoring solution, then you're maybe prepared to pay -- this is, of course, very rough, but maybe you're paying SEK 5,000 to SEK 10,000 a month. So even that if it's kind of small penetrated right now compared to all the customers that we have, those customers are adding up, and they're contributing to the ARPC over time.

[Erik Lindholm-Rojestal, analyst]

Clearly, a very important driver. But I mean can you talk a bit about maybe the penetration of the money segment? Or how many of your customers roughly are also using your money services?

[Tommy Eklund, executive]

Yes. So we have not revealed it in detail, but just for you guys to get a feeling of it, we have bookkeeping, which is almost used by all our customers. You can share that since it's almost used by its all. Then we have the invoicing product, which is kind of the starting product for the finance service, which is now penetrated about 25%, 30%. So bookkeeping 100% penetrated. The invoicing product, which is customer invoicing, penetrated about 25%, 30%.

Invoicing service. It's when we're distributing invoicing for our customers' sake and collecting money for their sake. That is roughly penetrated about 10% of the customers that are using the invoicing product. And then I think it's for you guys quite easily to calculate how many of those that are using the factoring solutions. But it's kind of low compared to, of course, the other numbers. But it's -- as you can see in our numbers, it's growing more than what we're doing on group level. So that is -- the penetration is increasing now all the time.

[Erik Lindholm-Rojestal, analyst]

All right. That's a good flavor and a lot to process there. But I think transaction revenues sort of clearly accelerated in the quarter, the year-over-year growth. I mean previous quarters, you have talked about sort of a clear macro impact, especially showing up there rather than in the customer number perhaps. Can you talk a bit what -- about what drove this sort of reacceleration?

[Tommy Eklund, executive]

Yes. I wouldn't say that the macro environment is better. I think that's -- we're delivering better right now. This has been an investment area for us for many years, and we're releasing more and more products that are based on that because it's -- some of the products, you are prepared to pay for access, which is subscription for us. But then some products gives you so much value when you're using it. So it's kind of obvious for you that you're prepared to pay for that. So it's really good for us because we would like to, as much as possible, connect value to price, and having the ability to either charge for access or usage is really good for us because then we can, in an easy way, explain to customers that this is a huge value for you. Of course, you are prepared to pay for it.

So -- and we're coming up with more and more ways of connecting value to price, and then customers, it's, of course, a no-brainer to pay for it because it includes so much value. So we're becoming better and better at optimizing our price model. So it's connected to customer value. And I think that is shown in numbers as well.

[Erik Lindholm-Rojestal, analyst]

This sort of optimizing of the price that you talked about, does that mean sort of a more dynamic, through the year, gradual price hikes and price adjustments on different products? Or will you still be doing sort of a round of price hikes at the start of a year?

[Tommy Eklund, executive]

We'll see. I've said it now a couple of times that

to me, I would like to have it like that. But we have a history and we have partners and everything. So it's not obvious exactly how you're going to do this, but our vision is definitely that, that we're optimizing the price almost in real time to make sure that we're always connecting value with price because then it's never a discussion with the customers because it's so obvious how much value we're delivering. So that's definitely the direction that we're going in.

But we have a history. We have a lot of customers, so we have a lot of structural value in that history. So it will probably take some time, but that is definitely the direction that we're going in.

[Erik Lindholm-Rojestal, analyst]

So I guess it's -- I mean soon, it's March once again, and you have done price hikes now 2 years in a row, in March, right? So what should we expect for this year? Should we expect a price hike in March as well? We'll see...

[Tommy Eklund, executive]

Yes. All right, yes.

[Erik Lindholm-Rojestal, analyst]

We'll see, stay tuned. And then of -- thinking about the intake in the quarter, very solid at 16,000, obviously. Even -- I mean reading the macro headlines, you would believe that maybe it would be down year-over-year. But was this driven by any sort of particular segment or any size of company? Are you winning from your competitors, et cetera?

[Tommy Eklund, executive]

We haven't been able to connect that to any of that. It's just that we have definitely been able to connect that we are quite sure that the number would have been even stronger if we wouldn't have the macro environment. So in that sense, it definitely holds us back a bit.

But other than that, I would say that there is no onetime impact in the numbers. I think it's just that this is a long-term job. We're improving all the time. As I said, we have this product addressing accountants. I think that we're delivering more and more value to them. And with that, they also understand that it's more value if I bring all my clients into the platform. It then takes some time for them to understand and for us to explain and also -- so we're becoming better and better on delivering value that the platform is so much better if you're adding more of your clients. So we're improving all the time together with accountants, but then, of course, also we're becoming better and better in our direct channel, which is our web page, to explain to entrepreneurs how much value we can bring by using Fortnox as their platform when they run a company.

So we're becoming better in both distribution channels. And I think that is seen now. So our sales process is not just something that happens in real time. It's always long-term work.

[Erik Lindholm-Rojestal, analyst]

Right. And I know you don't report churn, but sometimes you comment on the sort of general market. I mean what are you seeing in terms of churn in the general market? And also sort of are you seeing lots of movements between competitors, more than normal? Or is it sort of in line with normal?

[Tommy Eklund, executive]

In the quarter, we haven't seen that. I get questions about bankruptcies. Of course, we see it. But then again, you can also see that in Sweden, the bankruptcy numbers are quite low in absolute numbers. So even if it's up 30%, 40%, 50%, which has been -- it's like 1,000 companies. When you have more than 500,000 companies, it has -- it doesn't have a huge impact on the numbers. So it's there, we can see it, but it's marginal regarding the impact that it has on Fortnox, I would say.

[Erik Lindholm-Rojestal, analyst]

Yes. One more sort of short-term question here on the quarter, but your margins were up 6 percentage points year-over-year in the quarter. And you're obviously investing in a lot of areas, releasing a lot of products at a very high pace. But can you talk a bit about sort of the investment needs you are seeing in the business into 2024 and perhaps sort of if we should expect any reacceleration in the cost growth here or...

[Tommy Eklund, executive]

No, you shouldn't expect any big changes. We're running the business as we think it's the best for our customers. And right now, we are on a good level. So we've said it many times before, we're not pushing margin. We're still kind of a startup, so we're still investing in the future. A lot of the things that I've talked about which will have huge customer value like insights and payments and all those new products which have -- definitely will have huge impacts. There are no earnings connected to those right now.

So I think that we're maintaining to still have very long term in our investment and also show scalability right now. So I think that we're in a healthy margin in all aspects. We're investing in the future. We have a scalable business and we're growing.

[Erik Lindholm-Rojestal, analyst]

All right. Okay. There was a question on the -- in the chat there as well on this topic, asking about if you have any sort of guidance on staff count into next year? Should we see clear operating leverage also for next year, is that sort of fair to assume?

[Tommy Eklund, executive]

Again, we're not guiding. And I think that you that are following Fortnox, you know that we are quite stable. So I think it's quite obvious in what direction we're heading, although we're not guiding. So nothing unusual to expect. If you look historically in our numbers, I guess it's quite easy to guess the future for you guys.

[Erik Lindholm-Rojestal, analyst]

Your free cash flow in the quarter was very strong, I guess partly driven by less growth in the sort of loan book or in the financing commitments. Was this sort of a conscious decision, would you say, to prioritize cash flow here in Q4? Or what is sort of determining how much capital you're committing to this, to the finance?

[Tommy Eklund, executive]

No, I think that we're quite strong in our cash flow. I know there were some concerns during the quarter 3 report, but I said that you shouldn't follow that quarter by quarter. So I guess that I'm saying the same thing right now, you shouldn't follow that quarter-by-quarter. We have a really strong cash flow.

And yes, we're using some of our money in the lending business, but I think that's good. So when that is up, that is good. And when it's not up, it's -- we're showing that we're delivering money. So I think it's quite easy to follow our cash flow. And yes, it was up like 100%. So of course, it's a solid quarter, and I think that is what we should show when we're not using the money. But you shouldn't follow that quarter by quarter. It's not the purpose of cash flow in Fortnox.

[Erik Lindholm-Rojestal, analyst]

But thinking of the total year, I think you tied up SEK 166 million in the loan book, call it, or the money segment. I mean should we expect that this number continues to grow here as you also continue to...

[Tommy Eklund, executive]

Yes, for sure. It's an investment area for us. So we think it's a good investment. You know that we are having a price point of the factoring business on like 2.5% right now. And that's monthly interest rates, so it's like 30% annual interest rate. And the loss rate is about 2%, 2.5% on a yearly basis. So I think that it's quite a good use of money, quite good ROI and since it's only short term, it's only 30 days, so we're using the same money like 12 times every year. So I can definitely defend that we're using the money for that purpose.

And yes, it will increase. It's something that we're going for. It's a lot of value for our customers. It's not -- it's a service that no one else has. It's very efficient. It's very easy to use. It's a reasonable price point and all of that. So it's a really good product. And -- the earnings are almost as if it was a software business. So it's something that we're going for. So I think it's good use of the money.

[Erik Lindholm-Rojestal, analyst]

Yes. what would you say is sort of determining growth in that? I mean how much you are tying up in the loan book, is that sort of driven by demand? Or are you doing as much as possible? Or is it sort of you pushing the brakes...

[Tommy Eklund, executive]

We're not saying no to any deals because we don't have the money for it. So you can see that we have -- we have a lot of money on our bank account that we can use, and we also have this revolver that we have talked about, which is like SEK 500 million. So we're quite prepared for growth in the area, for sure.

[Erik Lindholm-Rojestal, analyst]

Yes. I think you mentioned that loan or credit losses was down year-over-year.

[Tommy Eklund, executive]

Yes. It's in the factoring business, which is our core lending business, I would say, is going down now, so it's trending down. But it's also we have done huge investment, so that's also expected. We have done so much regarding real-time credit scoring in that area. So now we can actually begin, based on all the data that we have, we can in real time put a number on all the invoices which is distributed platform, which is -- now it's like 1.5 invoice per second in the platform, and we can put a number on each invoice. So we know exactly the credit risk in real time on each invoice. And with that, we can put the price on each invoice.

Like we talked about regarding price optimization, I mean when you have that ability, why should you put a number on the percentage when you have the ability to have real-time pricing like that? And that is done with AI so that we're learning all the time. Since we also have payment history, we have -- we know the answer so even if we were wrong on the risk level on an invoice, then the system is learning to become better and better. So even if we're good now, we will become even better going forward.

[Erik Lindholm-Rojestal, analyst]

How important is the sort of Fortnox card and the payments initiative and all of that tying into the lending business?

[Tommy Eklund, executive]

It's really important, both regarding insights and credit scoring. So to keep track of how your business is doing in real time is crucial for us. And that's why we're investing in integration to IRS, integration to banks. As I said, the card, we're making sure that we're moving payments inside the platform because when we have real time ability to look into a company, in real time, of course, we can give so much back regarding guidance and insights and credit scoring. So it's crucial for us, and that's also why I've said that many of these products is actually something that we're not charging our customers for right now because, of course, we're not charging our customers to connect your Fortnox platform to IRS. We're not charging to connect your Fortnox platform to the banks. Of course, there's a lot of value there. But we're not charging our customers because we want them to use it because if everyone is using that, of course, we will be able to bring so much value back with insights and real-time credit scoring and all of that. So that's the huge value that we're bringing back to our customers eventually.

[Erik Lindholm-Rojestal, analyst]

I think you -- I mean you mentioned, I guess, the lower credit losses. You talked about them being driven by your improvements in sort of assessing credits and also sort of -- yes, there was a question actually in the chat about sort of how much of the EBIT growth in the quarter here is driven by the lower credit losses year-over-year. Is that sort of a meaningful driver, would you say?

[Tommy Eklund, executive]

In Pengar, it's definitely a driver. But then as you can see in our P&L, it doesn't stand for a huge thing in the group P&L. But definitely in Pengar, of course, it's important that we keep track that everything in Fortnox is scalable. So in that sense, when you're looking -- future looking at it, it's really important that we keep track of that.

[Erik Lindholm-Rojestal, analyst]

Yes, exactly. Maybe a final question on the finance vertical bar, is there sort of a end goal here, how big the loan book can be sort of in percentage of -- I mean where do you want lending revenues to end up in percentage of the total revenues or somewhere along those lines?

[Tommy Eklund, executive]

To me, I don't understand why not every one, every customer should use it, both the invoicing service and the collection and factoring. It's a really good service and it's affordable and it's really good for everyone.

So to me, it's a product for everyone, for sure. And yes, of course, if you just look in the future, the loan book will eventually be quite big. I think that, yes, if we keep maintaining that in our own working capital or if we're moving to a partner for this, it's not that important right now in the phase where we are right now. It's something that we can do if we want. But again, right now, it's 30% ROI per year. I think it's quite good use of the money. But of course, over time, we will have bigger working capital than other SaaS companies that doesn't have that. And then if we think that is a negative thing, then we can move away from our balance sheet. With a gross interest rate of 30%, we can easily fund that with a partner.

So it's not a problem. It's just that now we have the money. It's good use of the money. So right now, we're using our money but of course, we have prepared a lot of partners if we want to go in that direction. So we are prepared to go in any direction here. We don't want to say no to any customers because of that reason, so to say.

[Erik Lindholm-Rojestal, analyst]

Okay. So there is possible partners, too?

[Tommy Eklund, executive]

Yes, for sure.

[Erik Lindholm-Rojestal, analyst]

Perfect. Interesting. And some questions from the chat here. Some questions on the capitalized development spend, maybe a favorite topic of yours. No, but I guess you're seeing operating leverage sort of on all lines of the P&L, but maybe not on the capitalized development spend. It stayed around 10%. Any reasons for this, I guess, investing in...

[Tommy Eklund, executive]

I think that we said this before, we have no aim to lowering that. We think it's quite good because we -- I think that we can fund the business on that level. So we're not pushing that. Of course, as I said, it's many of the new products that we're not even pushing revenue on because we think it's, long term, more important that what customers use the new products. So there is more for us if we were to push short-time earnings in for different products, but that's not what we're going for.

And in the same way, we're not pushing to lowering our investments. I think that over 40% EBIT is good enough, I think. But then you should also understand that in the macro environment that we are right now, we're moving a bit of our R&D investments from external consultants to own hires. So that is also in these numbers. So when you're reading those numbers, you should understand that we have been now in an environment where we have been easier for us to hire people and when we have an environment like that where we like to replace external consultants with hired people, and that is also seen in the R&D numbers.

[Erik Lindholm-Rojestal, analyst]

Slightly different topic, but another question from the chat here. So subscription revenues have been slowing somewhat the growth year-over-year, but new products have seen sort of acceleration of the transaction revenues rather. Should we expect this shift in composition to continue year ahead, would you say?

[Tommy Eklund, executive]

I would say that I'm not sure. It's more connected to we're not pushing any of our revenue stream. So we think subscription is good revenue. We think that transaction-based revenue is good revenue. We think that lending-based revenue is good revenue. And exactly what we're pushing quarter-by-quarter, it's not something that we decide. It's more connected to the thing that I explained that we're pushing optimizing price. So we think that it's really good if our customers are using our factoring product. And that's why there is no subscription on that and there is no transaction on that. Instead, they're paying interest rate, and it's the same way with the Fortnox card. No subscription, no transaction and not even a lending base, but we earn 1% on transactions, which we think is quite a good number anyway. So I think that it's not something that you may -- should -- you should not maybe follow them because we're actually moving revenue streams here because we're optimizing price. So it's not always on purpose to optimize a specific revenue stream. It's more connected to we're optimizing our price [ mettle ] model connecting to value.

[Erik Lindholm-Rojestal, analyst]

Yes. Yes. Okay. Understood. And then you gave some good flavor on the Fortnox card. I think it's a very interesting product. There were some questions in the chat as well. I mean did this contribute to the acceleration of the transaction revenues in the quarter? Is it still too small?

[Tommy Eklund, executive]

It's too early. So it's picking up, but it's picking up from 0. So we're, on a group level, are quite -- a number which is quite high when you compare that to a specific new product which no one used in October. So no, it didn't contribute yet. But it's, of course, growing really good.

[Erik Lindholm-Rojestal, analyst]

Yes. How -- I mean how do you view the Fortnox card? Is it -- would you say that it's more of a part of a bigger insight puzzle or more of a revenue generator long term, I'm thinking?

[Tommy Eklund, executive]

I think if we were to release a card only because of the 1%, I think it will not be successful. So -- but we didn't do that. We could have done that many years ago, but we wanted to have the ability to do this for real where we have connected that to the AI bookkeeping thing, the expense management so that it's connected to all the other products in the platform. And we wanted to have the ability to distribute it to all employees, and it should be for free. And that wasn't possible a couple of years ago. But now we have partners and the ability to do that. And then we feel that, yes, this is a lot of customer value by releasing this product. Then of course, I also understand that if you are doing the math, if all our customers were to use the card, of course, it's a huge TAM also, but will we ever reach that TAM if we don't deliver value?

[Erik Lindholm-Rojestal, analyst]

How do you think your -- the people who are opting to choose the Fortnox card, do they already have an existing solution? Do they use any of the competitors, [ Pay ] or the likes? Or is it sort of your existing bookkeeping customers that get a card?

[Tommy Eklund, executive]

We have seen it all. So it's customers coming in from all different customer types. So we have really big customers who are using like 50 cards, but we also have self-employed. We have -- even though that we have not launched this to accounting firms, there are still accounting firms that have tried it out and using it. And when an accounting firm is using it, it's not for their own sake. Yes, maybe they're using it for their own sake also, but it's mainly for their clients then. So I think it will be customers all over. But of course, we're looking forward to more in a concrete way, also launch it to accountants because it scales really good when accountants are picking up products. So we're looking forward to that.

[Erik Lindholm-Rojestal, analyst]

Is that a more meaningful push in the launch, would you say? Is that when it could take off for you, or?

[Tommy Eklund, executive]

I think for new customers, it's quite obvious. When you're becoming a new customers, I think that we are quite good at that time to explain to new entrepreneurs that you would benefit from using the card. But then as you're referring to, you may already have a card if you are an entrepreneur, so in that sense, it may take some time to explain why you should change. But if you're looking into accountants where if your accountants say that you would benefit from having this business card, you're just using it. So I think in that sense, it's really good to have partners like accountants which entrepreneurs trust and rely on. So when they're saying that you should use this business card, it's really good for us to have partners like that.

[Erik Lindholm-Rojestal, analyst]

There was a question in the chat here actually on -- just on that, which -- what incentives are you giving to accountants to push the Fortnox card to customers?

[Tommy Eklund, executive]

It's very -- I haven't seen any dialogue right now that -- no, the reason for accountants to use it, it's efficiency. So we don't talk that much about sharing revenue because in general, we have such a small number on revenue compared to accountants. If we're now charging like SEK 270 per month, they may charge, of course, roughly like SEK 5,000. So if they're starting to get percentage on our revenue, it's not that meaningful for them anyway. So it's all about efficiency. But if they can equip their clients with a card which will remove all the handing in of manual receipts, also for them to get real-time knowledge of the businesses of all their clients, it's a huge value for them. So it's more about efficiency and also giving them ability to advise entrepreneurs on what they should do in real time instead of having an accounts closing, which is 6 months later or even a year later, and then it's too late. You need to change earlier than that.

So to give them that ability, it's much more important than actually start to have revenue sharing on revenue stream because it's not that important for them. Because if they can -- if you have 10% EBIT in an accounting firm, that means that cost of delivery is like SEK 4,500 on those SEK 5,000. If cost of delivery can go down, that's worth so much more to them than starting to have like 10% on the SEK 270. So you have to understand that, that's the real value for them, it's efficiency.

[Erik Lindholm-Rojestal, analyst]

Yes, of course. And then switching over to a slightly different topic here, but you talked about building up a sort of sales force to drive growth in the more enterprise segment. Where would you say -- I mean how far have you gotten in this? Maybe how many people are actively working on this? And how many accounts have you signed up so far?

[Tommy Eklund, executive]

Yes. We're not sharing accounts, but I have a small team now working only on that segment. And it's really promising. It's a bit of a different way of selling. But we can see that the portfolio is really good. It's scalable. So I think that we definitely can compete with the biggest in this area. So it feels really good. But of course, if you compare that to our sales process, it's a bit different. It's a bit longer. But then the order intake per customer is also many, many times higher. So it's definitely worth the effort, and it looks good.

[Erik Lindholm-Rojestal, analyst]

Has this already started to meaningfully help ARPC, would you say?

[Tommy Eklund, executive]

Yes. Then on group level, since this is a new initiative, it's maybe not seen in that obviously on the group numbers. But if you just look at that initiatives, it's growing really good now. So if you look heading that business in the future, yes, it will definitely have a good contribution also on group level, and it's growing faster than group level right now. So it's interesting.

[Erik Lindholm-Rojestal, analyst]

But all the -- but you said that all the pieces of the puzzle needed to grow that business are now in place and that sort of it should...

[Tommy Eklund, executive]

I think it's the same in all aspects of the platform. We're never done. So you always want to do more. But since we released this group capability, that was definitely an important piece that we didn't have before. So that is important. But I also guess that we will continue to release new products and new partnerships and new apps to be able to be feature complete or even improve the offer as we go.

[Erik Lindholm-Rojestal, analyst]

Is it possible to put a number on the ARPC difference for these large accounts versus the small accounts?

[Tommy Eklund, executive]

It's -- we have customers that are paying like SEK 50,000 per month.

[Erik Lindholm-Rojestal, analyst]

Are those the biggest ones, or?

[Tommy Eklund, executive]

Yes, we have customers that are even bigger. But customers are on that level where you're paying. So if you compare that SEK 270, of course, it's a huge contribution to the ARPC. But then again, in numbers, those companies are quite few compared to all the companies in Sweden. But it's worth going for it because -- and when we're talking about our price point, it's still ridiculous low compared to the current players there. So if we want to push price, we can do that, but we can also increase price if we want to be to set a market price. So the prices that I'm talking about right now are the numbers that we're using according to our own business model, but we may also -- either we push price or we're setting price according to the market.

[Erik Lindholm-Rojestal, analyst]

There was a question in the chat on this topic. You mentioned you were in the final 2 for a tender -- for a big account late last year. Can we have an update on that?

[Tommy Eklund, executive]

We're still in that phase. Yes, it looks quite good. It was almost surprising to me that we could compete on that level, but it's quite interesting. We'll see if we -- it's kind of a long shot. But anyway, we're there competing with the biggest players. So it looks promising.

[Erik Lindholm-Rojestal, analyst]

I guess another area of investment was getting better with addressing the really small companies, the 0 to 4 employees sort of segment. Would you say that? I mean how far have you gotten in doing that? And what do you need to get better at, would you say at?

[Tommy Eklund, executive]

I think that we're getting there. We're working on -- actually, our core product could do even better there. So we're improving the bookkeeping product. So that is something that we want to do during the year even better for the smallest entrepreneurs but then also the things that happens when you close the year. So the annual reports and all that is also something that we're working on to become -- we have all the capabilities, of course, because we have a huge number of customers already in that segment, but we want to become even better. So we already have a product for payroll for that segment. We already have a specific product regarding invoicing in that segment. The card is definitely a product which is addressing this segment. And now we're working on to have a version of bookkeeping for that segment as well. And then we have accounts closing in annual reports and all that. So I think that with the releasing that we're doing, I would say, the first 6 months now, I think that we will have a really good full-blown offer for that segment later this year.

[Erik Lindholm-Rojestal, analyst]

All right. Sounds promising. Then maybe touching on Offerta a bit or the marketplace segment. It's been almost exactly 3 years since you acquired Offerta and you continue to expand the marketplace segment, adding Cling, et cetera. I mean how would you say that the acquisition has turned out so far versus your expectations sort of 3 years in? And yes, maybe this has been an area where you've seen more macro impact than the others.

[Tommy Eklund, executive]

Yes. I think we have communicated that we think it's a really good -- Offerta is a really good, product-wise, a really good synergy because Fortnox has historically been really good at everything that happens after you win a deal. So after you win a deal, you need to do time reporting, you need to do invoicing and bookkeeping and all the things that happens after we win a deal. So with Offerta for that industry, we've become really good at everything that happens before a deal. So that's quotes and also even deals. So that is -- Offerta is like a CRM system for handyman, so to say, which also includes the deal. So you get the software capabilities but you actually also get new customers by your softwares provider, which is quite powerful.

So we think product-wise, that's still a really good synergy. And more and more of our customers are seeing that. So we have more and more cross-selling now, both directions, I would say. So Offerta customers, which are not in numbers that many, it's very seldom now that you are an Offerta customer and you don't use Fortnox. And more and more of our Fortnox customers in that specific niche are definitely moving over to also have an Offerta subscription. So that is happening.

But what also happened was, as we said, the macro headwind. So if we have something in the platform which is quite obvious where we have a headwind, is renovation of bathrooms and everything that you do at home, it's not -- the consumer market for that is definitely down.

So we have now developed the ability to do -- because what Offerta didn't have when we acquired them was the ability to do sales and marketing, digital. That is something that we have done now. So we have added that capability to the Offerta platform. So now you can sell subscription connected to the Offerta platform as -- the same way as we do in Fortnox. So that can be done now, but we don't want to push that right now because it's a headwind on the consumer market. So we have prepared now. So when the market is changing for the consumer side, we think we have the ability to push this right now. So I think that we have prepared for a change here.

[Erik Lindholm-Rojestal, analyst]

A follow-up on that from the chat here was, how fast is Offerta growing year-over-year now?

[Tommy Eklund, executive]

We're not following Offerta in detail, but it has been quite flat so for the last 2 years right now, during this investment phase that we're doing right now.

[Erik Lindholm-Rojestal, analyst]

Switching to a completely different topic. But I think this is a recurring question for you. I mean -- and one coming from the chat here as well. But would you say that 2024 is the year where you're looking outside of Sweden? It sounds like you have a lot to do here still in Sweden launching lots of new products and growing still. I mean yes, any...

[Tommy Eklund, executive]

It's an obvious question. If you can do what we're doing in a new country, of course, it's something that would be interesting. But I will say that we have shown now that we have a really good business case in Sweden, and we are just in the starting point of Fortnox. So we're in early phases in many of our aspects, but still being able to have quite scalable business, although we are quite early on. So I think that I don't -- I never want to miss out on the opportunity on delivering on the business case in Sweden. But then, of course, we're always keeping track of things that are happening outside Sweden. But again, my focus is definitely Sweden.

[Erik Lindholm-Rojestal, analyst]

All right. That makes sense. But your customer intake, I guess it's been very stable in absolute numbers the past couple of years, even despite seeing bankruptcies and lower company information, et cetera. How should we sort of think about that 50,000 to 60,000 net adds number going into 2024? Is that a fair number also for this year?

[Tommy Eklund, executive]

I've said it that the 5-year business plan, which includes this going from 350,000 to 700,000, It's not linear because we're investing in the 0 to 4 number of employees segment. So it's supposed to pick up in our own plans. Then exactly what is happening in the macro environment, we'll see. But it's definitely according -- going according to our plans. And I think it's seen also we're delivering 60,000 net adds now in quarter 4, where we're in a recession in Sweden. So I think that we're showing that we're better now than we were last year. So we are definitely delivering on our own targets. Then of course, we need some kind -- eventually need some kind of help from the macro environment. I guess we'll see.

[Erik Lindholm-Rojestal, analyst]

Yes. But I guess you have 40% of the businesses in Sweden right now, depending on how you measure it.

[Tommy Eklund, executive]

[indiscernible] market share because it's kind of hard to calculate that.

[Erik Lindholm-Rojestal, analyst]

Definitely. Okay. Okay, that makes sense. But I guess we are running out of time here, but I'd like to finish off with maybe a last question then on heading into 2024. I mean what are you sort of most excited for? What are you maybe least excited for here in 2024? And yes, any thoughts heading into a new year?

[Tommy Eklund, executive]

Yes, I think that it's quite obvious that we're looking forward to these new products. I've talked about AI bookkeeping, bank integrations are picking up. We have a new version of our invoicing product is coming up, so that looks promising. And all the things that is happening in payments and financial services, it's still -- it's a really good product and it's -- but it's still kind of low penetrated compared to all customers, and the products are developed for all customers. So I think that we can deliver so much more value in these new products than what we have historically done. So I'm really looking forward to that. Bringing payments into the platform will be really interesting. So looking forward to 2024.

[Erik Lindholm-Rojestal, analyst]

So 2024 is the year of payments, yes?

[Tommy Eklund, executive]

Yes, we can state that.

[Erik Lindholm-Rojestal, analyst]

Perfect. All right. So thank you, Tommy. I think this concludes the Investor Forum for Q4 2023. Thank you.

[Tommy Eklund, executive]

Thank you.