Bullish indicating open at $55-$60, IPO prices at $37
Fortnox AB (FNOX) reported a robust fourth quarter for 2024 with net sales reaching SEK 540 million, marking a 20% growth, largely driven by a 25% organic increase. Despite strong financial performance, the company’s stock dipped by 1.2% to SEK 75.56 in pre-market trading. According to InvestingPro data, the company has demonstrated impressive revenue growth of 26.29% over the last twelve months, though it currently trades at a premium valuation with a P/E ratio of 67.81. The earnings per share (EPS) forecast was set at 0.3064 USD, with revenue expectations at 540.12 million USD.
Key Takeaways
- Fortnox’s net sales grew by 20%, with a significant contribution from organic growth.
- The company achieved an EBIT margin of 47%.
- Stock price declined 1.2% in pre-market trading despite solid earnings.
- Fortnox expanded its product offerings and improved customer insights.
- The Swedish economic environment remains challenging, impacting transaction volumes.
Company Performance
Fortnox demonstrated strong performance with a 20% increase in net sales, reaching SEK 540 million. This growth was underpinned by a 25% rise in organic sales, highlighting the company’s robust market position. The EBIT stood at SEK 254 million, reflecting a margin of 47%, which is impressive given the current economic conditions in Sweden. InvestingPro analysis reveals strong profitability metrics, with a return on equity of 37% and return on invested capital of 32%. The company continues to focus on small and medium-sized businesses, with 60% of its customer base comprising sole traders.
Financial Highlights
- Revenue: SEK 540 million, up 20% year-over-year
- EBIT: SEK 254 million, with a 47% margin
- Rule of 40: 67% (growth + margin)
- Organic subscription-based revenue growth: 21%
- Lending-based revenue growth: 41%
Outlook & Guidance
Fortnox plans to continue focusing on increasing the average revenue per customer (ARPC) and monetizing transaction data insights. The company remains committed to its organic growth strategy and expects to maintain its trajectory despite economic headwinds. InvestingPro awards Fortnox a "GREAT" Financial Health Score of 3.46/5, supporting its growth strategy. Future guidance includes continued product innovation and strategic price adjustments aligned with value delivery. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro, covering this and 1,400+ other top stocks.
Executive Commentary
CEO Roger Hatelius emphasized the company’s strategy of aligning pricing with value delivery, stating, "We are trying to match price with the value we deliver." He also highlighted the importance of user engagement, saying, "The more we get users to use Fort Knox, the more insights we collect."
Risks and Challenges
- Macroeconomic pressures in Sweden could impact transaction volumes and customer spending.
- Market saturation in the business software sector may limit growth opportunities.
- The integration of new products and services poses operational challenges.
- Potential volatility in lending-based revenue streams due to economic conditions.
- Increased competition from other business software providers.
Q&A
During the earnings call, analysts inquired about the impact of macroeconomic conditions on invoice volumes and the company’s organizational changes aimed at enhancing user experience. Fortnox executives confirmed no material non-core business flows and discussed the potential for increased value in the sole trader segment.
Full transcript - Fortnox AB (FNOX) Q4 2024:
Niro Dander, Head of Investor Relations, Fort Knox: Good morning, everyone, and very welcome to Fort Knox Q4 twenty twenty four Report Presentation. My name is Niro Dander, and I’m Head of Investor Relations here at Fort Knox. And today in the studio here in Becker, I have our acting CEO, Roger Hatelius. Today, we will hear Roger presenting the Q4 in numbers followed by some business highlights and then we have time for questions. You can call in directly to us here in the studio using the number 46855931337 or send them to us in the chat.
We will have around twenty minutes for Q and A session, and we will try to answer as many questions as possible. But with that, I hand over to you, Roger.
Roger Hatelius, Acting CEO, Fort Knox: Hi, and welcome, and thank you, Mia. So let’s look at some numbers for Q4. It was been a good quarter. We had an organic growth by 25% and a strong margin. We saw a customer growth of 13,000 customers, little bit below last year and slightly affected by the divestment of AFFIRTA but also some slow growth among accounting firms’ customers.
Another important metric for us is the usage in which we measure the average revenue per customer, which increased by SEK 5 in the period. And the revenue growth was 20%, but the organic growth was 25% and that’s excluding then the impact of the divestment of AFFRTA. We had an EBIT margin of 47% and here we had some nonrecurring other operating revenue by million. And we had two one offs. One was the divestment of AFFIRTA but also reevaluating the earn out connected to the acquisition we made earlier this year of Boardieser and Visualbuy.
And excluding those, the EBIT margin would have been 42%. And when we then combine our growth and margin, we land at 67% in our rule of Fort Knox. So in 2020, we put up some kind of aggressive target. We said that we will double the number of customer and also double the average revenue per customer. And so forth, we have had a great development towards these targets and we see already now we are about to close the average revenue per customer, learning at SEK $2.98 per month.
But we are a little bit behind on the number of customers. But for us, it’s the combination of those two, the number of customer and the usage that has been crucial for our growth. And also as a result of what we announced in November, the new organization, we will focus even more on usage, which will drive an average revenue per customer. But still, it’s the two metrics in combination that we believe drive growth. And so we stick to those according to the business plan that we established in 2020 and taking us the full year of 2025.
So with the net sales of $540,000,000 and an EBIT of $254,000,000 we believe that we proven a continued growth and scalability despite challenging marketing conditions. And on rule of footnotes, well, we balanced the growth and the margin. We landed at 67% in the quarter but also for the full year. And I’m really pleased to say that we now, in 15 quarters in a row, have been above 60% in rule of fotmox. On net sales, as I said, we had a growth with 20%, but 25% organic growth.
The divestment of Ferta impacted the subscription based revenue. And excluding those, the organic growth in subscription based would have been 21%. The highest increase we see in lending based revenue, where the growth was 41%. And there is mostly driven by the product where we offer customers payment directly upon invoicing, where we have the growth above 50%. On this page, you also can see how we will report net sales in the new structure where we have business platform.
This is responsible for our core SaaS offering where we have subscription based revenue connected to the users but also transaction based revenue. For example, payslips or capturing supplier invoicing, which are largely recurring as well. And then we have financial services, which are responsible then for our financial offer but also payments. And here we have transaction based revenue from the invoice services where we help our customer to send invoice and send reminders but also collect money. And here, we also have all the lending based revenues where we have this, that I talked about before when we help customer get paid directly upon invoicing, also corporate loans and the upcoming PayLater products.
And in the quarter, as for the full year, the growth drivers have been existing customer followed by new customers and of course, some impact of the price adjustments. And the price adjustment that we made earlier in last year accounted for just above five percentage points of the total net sales growth for the full year. And looking at the income statement, we highlighted the other operating income where we had a positive effect of $25,000,000 and these were the lower estimated earn out as well as the divestment of AFFRTA. And looking at the balance sheet, we have highlighted that we now are owner of a new jointly owned company, which holds Oferta, and we own 49%. And we also see on the asset side that we have an option to buy additional 3% of that company.
On the liability side, we have a decrease of the lowered expected future earnouts. And on the cash flow, we highlighted that we have a grow in our lending business, which, of course, impacts the cash flow. But looking then at the free cash flow adjusted for lending and acquisition, we see that it remains stable. So to summarize the year, we think it’s important to maintaining the balance between usage and the number of customer. And for the full year, we added another 62,000 customers, and we increased usage and the average revenue per customer increased by SEK 30.
We passed SEK 2,000,000,000 in net sales And we had a rule of hot knocks of 67% when we add growth of 25% and an EBIT margin of 43%. So then some business highlights. These two numbers reflects the shift that we are about to broaden our offering from more compliance driven workflows to more business driven insights. So we are already supporting a significant portion of the Swedish businesses. And the first number is the value of all received supplier invoices in Fort Knox during 2024.
And with all this vital data and key metrics that we handle for our customers, we want to bring back more or provide more value to the companies. And one step towards that is that we now have more than 50,000 companies benefiting from our product insights each month since we launched that to all customers in October. With organizational changes we announced in Q4, we believe that we can further strengthen our ability to drive growth and scalability. And the new organization came into effect on January 1, enabled us to even focus even more on core business flows with all the transaction in those flows. And we believe that we can create a better user experience and strengthen for Knox as a whole and as one.
But also, it’s important for us to integrate payments and financial products as a part of those core flows. And looking at this picture, we can see that payments are an essential part of all the workflows. And therefore, we think it’s important to further implement them into the ecosystem. And we see a strong benefit for our customers and their end users with simplified payments. They get better control over the payments, better user experience but also higher security.
And the more we get the users to use Fort Knox, the more insight we collect and the more insights we can give back to our customers and the decision makers around the companies. And of course, for Fort Knox, this enables new revenue streams and continued growth possibilities. So to summarize, we passed SEK2 billion in net sales and proved the scalable business model that we have. We are increasing the focus on usage and on core business flows. And we think that we can deliver even more value to the Swedish businesses.
Thank you.
Niro Dander, Head of Investor Relations, Fort Knox: Thank you, Roger, for the presentation. I think, yes, it’s now time for the Q and A session. And you can call in to us, as I mentioned, using 46855931337 or you can send them directly to us here in the chat. Actually, I already got a few questions. The first one is about the price adjustments we made last month and the impact.
And yes, the new prices, they start for new customers from January 30. And for current customers, the new prices will start earliest March 1 and the increase is expected to have similar positive impacts as previous increases. Also, if you got any feedback, of course, increases prices is part of business usual, but we are constantly increasing the value of our products. We feel that we actually have more actually to deliver to them. Next (LON:NXT) question is the packages that you offer to new customers or all customers last year, have you seen any impact on increasing the packages?
And we did expand from three to eight primarily as a marketing tool to offer to customers to tailor the solutions to give them better value. And when you give them better value, they use it more and that, of course, increases the ARPC and average revenue per customer. But we should be remember that this offering is only to the customers that come through the web and that’s around 25% of the new customers. And then we have one more question. Do you see an increased demand for your business cards?
Yes, we do. But adoption on new payment cards, it takes time as customer gets familiar with the benefits and integrate it to their daily routines. So while progress is steady, we do focus on increasing awareness and usage to ensure a smooth and successful rollout. I think we actually have some questions from the phone. Simon Grenard, ABG.
Good
Simon Grenard, Analyst, ABG: morning, Roger, and good morning, and thank you for the presentation.
Charlie Brennan, Analyst, Jefferies: I have
Simon Grenard, Analyst, ABG: a couple of questions. Initially, could you expand on the new organizational structure and how that changes the way you operate to better drive ARPC perhaps with a concrete example?
Roger Hatelius, Acting CEO, Fort Knox: Yes. So the whole organization is more focusing on one offer. So as a user, you should experience Fotmox as one system or one platform. So we believe that now in the organization we have, we will follow the user workflows more than isolated function or isolated products. So we believe that in yes, for the users, it will be a better experience and also to integrate payment and financial offering more into the core workflows for the companies.
Simon Grenard, Analyst, ABG: And a follow-up on that is whether you see the 8% price hike impact as reported in Q4 as relatively representative level to maintain over the coming years, partly in light of the just announced price hike?
Roger Hatelius, Acting CEO, Fort Knox: We are trying to match price with what we, the value we deliver all the time. So we are trying to connect price to the value. So and this price change we did now was in line with what we have done a couple of years before. So yes.
Simon Grenard, Analyst, ABG: Thank you. And a final question from me. The number of customers grew by 13,000 quarter over quarter. And then although you have previously reported that Oferta impacted this number by around 1,000 clients, It corresponds to a slowdown versus previous quarters. So my question is rather, is it fair to assume that you are seeing signs of a maturing market?
And for clarity, I don’t necessarily see this as an issue as it means a greater focus on ARPC. But what are you seeing here?
Roger Hatelius, Acting CEO, Fort Knox: You are right. We have the impact on Ofertha. But no, we have seen before as well that there is small violation between the different quarters. So no, we don’t see this as a trend, no.
Niro Dander, Head of Investor Relations, Fort Knox: Then I’ll take a question from the web. How much of the million 1 off in the quarter was related to Bordes and Visualbuy and how much was related to AFFERTA?
Roger Hatelius, Acting CEO, Fort Knox: So Bordes and Visualbuy, 14 and AFFERTA, 11.
Niro Dander, Head of Investor Relations, Fort Knox: Thank you. And we take another one from the web. How do you plan to capture the value of the amount of transaction flow and who are you displacing by handling payments directly on the platform? So basically, yes, how are we going to get value from the transactions that you previously talked about?
Roger Hatelius, Acting CEO, Fort Knox: Yes. So one thing is that if we gather all the transaction, then there is a lot of data connected to those actions that we can provide insights from, that we can give back to the customer, give value, what to do next, should I do this. So with all that data, we can have that in real time and really bring back great value to the company so they can perform better.
Niro Dander, Head of Investor Relations, Fort Knox: Yes. So they can make the right decisions and they can perform better, yes? Yes. Good. We’re going to take another one from the phone, Charlie Brennan from Jefferies.
Jorg Atling, Analyst, Pareto: I’m going to do three questions, if that’s okay. Question number one is just around your focus on core business flows. Can you actually say whether there are non core business flows that you’re doing today? And are you going to be deemphasizing those this year? And how should we think about that as we’re doing our modeling for the year?
Roger Hatelius, Acting CEO, Fort Knox: No. I wouldn’t say that we have any material that we want to do. But we want to explicitly say that this is the core flows that we are focusing on. So we have the supplier invoice flow, the customer with the invoice or get paid flow. We also have the expense management and around employers.
And then, of course, we have the accounting. But what we also are saying is that payments and financing is included in this, those flows. So that’s also an important thing with the workflows.
Jorg Atling, Analyst, Pareto: Okay. And then can I just ask a question about the ARR momentum? It feels like growth has accelerated quite nicely in the fourth quarter, but the sequential improvement versus Q3 looks bigger than it normally is for Q4. Are there any one offs to call out in that ARR development?
Roger Hatelius, Acting CEO, Fort Knox: No, not particularly. What we see is that when we the packages that Mia talked about before, we see a higher average revenue per customer from those new customers that enter into new packages. And that, of course, affects the RRR RRR times 12 since we count in that twelve years forward. So that’s the single one most that affects the IRR mostly.
Niro Dander, Head of Investor Relations, Fort Knox: And just to also highlight, the latest price increase is not included there as well. So
Jorg Atling, Analyst, Pareto: Yes. And then just lastly, can I ask about the AFFRETA transaction? Am I right in thinking that AFFRETA would have generated around 6,000,000 of profit in the fourth quarter of the year. Like if we annualize that, we’re at 24,000,000 of profit. Have you just sold that or 50 percent of that for million?
Is that what’s happened in the period?
Roger Hatelius, Acting CEO, Fort Knox: No, not at all. I couldn’t comment what they would have had for profit in Q4. But the million is dividend connected to the transaction. So that’s cash flow.
Jorg Atling, Analyst, Pareto: Okay. So the difference between your operating profit of million and the adjusted for acquisitions number of million, that million difference is not a further?
Roger Hatelius, Acting CEO, Fort Knox: In those numbers, you also include Bodyser and Vishal Buy,
Niro Dander, Head of Investor Relations, Fort Knox: the revalidated earnouts.
Jorg Atling, Analyst, Pareto: Okay. Thank you.
Niro Dander, Head of Investor Relations, Fort Knox: Thank you. Next on the phone, we have Jorg Atling from Pareto. Good morning.
Kim Gunnell, Analyst, BMBN: Good morning. Thanks for taking my questions. I have a couple. Starting with with the costs, I note that the other external expenses are up 26% over Q3 even with Ferta out of the numbers. Could you just give some more color on this increase and what you expect in ’twenty five?
Roger Hatelius, Acting CEO, Fort Knox: Comparison with quarter to quarter could be hard since in Q3, we also had the vacation period. And in other external, we have both marketing and, yes, consultant, for example, that could deviate between the quarters. But I don’t think it’s on annual basis that we are on almost the same level connected or compared to the net sales. So I don’t think you should think anything else for the future.
Kim Gunnell, Analyst, BMBN: Okay. Yes, Q4 is always high on that cost line, but it was probably higher than both last year and same levels as ’22 sequentially in Q4 even without Oferta. But then I read that as this is not a structural increase in the investment pace.
Roger Hatelius, Acting CEO, Fort Knox: You’re
Kim Gunnell, Analyst, BMBN: but rather Q on Q fluctuations. Okay. And then second question would be on the transaction revenues slowing down a little bit here in terms of growth. Did you see any negative impact from the holidays here in Sweden that we had in summer?
Roger Hatelius, Acting CEO, Fort Knox: We saw that this Christmas period were slower than last year. So yes, the holidays were more on working days. So it was more quiet in Sweden this Christmas than last year.
Kim Gunnell, Analyst, BMBN: Okay. So if we just take October and November then, say, as a proxy, that would have been higher growth than we saw for the full quarter transaction growth?
Roger Hatelius, Acting CEO, Fort Knox: That’s the way to put it, yes.
Kim Gunnell, Analyst, BMBN: Okay. And on the price side, you’ve done a couple. And last year, you talked about more price increases on transaction and so on and a little bit lower on subscription. And now you did that price hike in Q1, balance this pricemix this year?
Roger Hatelius, Acting CEO, Fort Knox: Kind of similar. So it’s also on transaction base this year. And since we have more subscription based, it’s, of course, the effect is bigger there, but the pricing is more linked to transaction based this year.
Kim Gunnell, Analyst, BMBN: Okay. More linked to transaction base again, so similar to dynamic last year?
Roger Hatelius, Acting CEO, Fort Knox: Yes.
Kim Gunnell, Analyst, BMBN: Okay. And just final question on the lending side. There’s obviously binding some working capital. Do you have a level for this part of the business where you will look for a partner to take that off balance sheet?
Roger Hatelius, Acting CEO, Fort Knox: Yes. We have that in our internal policy. But for now, we think that we are not close to that. So we are trying out and we think that we handle it best in our own balance as for now and yes, until now. So we are not close to that limit yet.
Niro Dander, Head of Investor Relations, Fort Knox: We lost him. I think we have a few questions from the web as well. The payment transaction flow, will we do it in house or with a partner what you talked about?
Roger Hatelius, Acting CEO, Fort Knox: We are already having a partner. So we offer our customers to give their customer a possibility to pay. So we have a check out there. And also customers can pay later, and we do that with a partner. But parts of it, we do ourselves and we also handle and have the right to handle payments by ourselves.
So it’s a mix.
Niro Dander, Head of Investor Relations, Fort Knox: Okay. Question about the customers that are using Insights. How are you monitoring it today? I mean, it’s quite a good start, I feel, launching it in 02/50000.
Roger Hatelius, Acting CEO, Fort Knox: Anything you can Yes. So it’s not a product that you can buy or subscribe to. The only we have connected it to the bookkeeping license. So you need to have a license at least. So that’s the only as a company.
So we are monetizing and creating more value to being a Fotnox customer.
Niro Dander, Head of Investor Relations, Fort Knox: Yes. And that’s our focus. Another question is about Swedish economy. It’s been challenging for a while. Are you seeing any better economic activity or possibly impacting this year?
Do we see anything?
Roger Hatelius, Acting CEO, Fort Knox: No clear signs yet, no.
Niro Dander, Head of Investor Relations, Fort Knox: I think we have time for a question from the phone. You are Kim Gunnell from BMBN.
Roger Hatelius, Acting CEO, Fort Knox: Good morning.
Charlie Brennan, Analyst, Jefferies: Hope you can hear me.
Roger Hatelius, Acting CEO, Fort Knox: Yes. Good morning.
Charlie Brennan, Analyst, Jefferies: Perfect. So we all know that Macros Sweden has been weak for two years now. So can you just provide some commentary with regards to how this has actually impacted your invoicing activity? I mean, if you can say something with regards of, say, how much lower do you call it invoices sent per customer is over the past few years? Because I would assume that this is a quite high margin product and with high operating leverage.
So how we should think about that as macro conditions eventually improve?
Roger Hatelius, Acting CEO, Fort Knox: Yes. I would like to give you a clearer answer. Of course, we see it depending on, of course, when you have a subscription, which part of our highest subscription revenue is invoicing as for one. That doesn’t affect that much, how many invoices you send. But we can absolutely see that there are lower transactions, including then invoices, as become also supplier invoices.
So there we can see it. And at the same time, we have organic growth by 25%. So it’s hard to say what it would have been in another environment. But we see there are less transaction. And if we are looking on cohorts or different customer groups, we see that it’s lower activity among those customers and that equals fewer invoices.
So we are impacted. It’s hard to say the exact numbers.
Charlie Brennan, Analyst, Jefferies: All right. And when it comes to the reorganization and the new structure, to what extent would you say that that has been a drag on your selling activities here in these quarters? I mean, has this impacted the growth? I mean, we saw an acceleration, yes, but any color there would be helpful.
Roger Hatelius, Acting CEO, Fort Knox: Also hard to say. Probably some effect when you do reorganization. But at the same time, we have digital sales channels. We have our accounting firms that are helping us bringing customers. So yes, I think we keep on working, but it’s hard to say.
Some impact probably.
Charlie Brennan, Analyst, Jefferies: Okay. And into 2025, is it fair to assume that pricing similar to this year will be more back end heavy, the tailwinds from the recent adjustments that you communicated?
Roger Hatelius, Acting CEO, Fort Knox: No. I would say you should look at it similar as the previous years. So no big differences.
Charlie Brennan, Analyst, Jefferies: Okay. But more tailwind towards the latter part of the year?
Roger Hatelius, Acting CEO, Fort Knox: No, I think it’s equal to last year.
Charlie Brennan, Analyst, Jefferies: Okay. All right, perfect. And finally, just, I mean, what are you most enthusiastic about with the whole mean, new structure set? You’re clear here that you will focus more on spending more time with, I mean, monetizing how your customers use the platform, etcetera. So on the, call it, new products here going live into 2025, what are you most enthusiastic about when it’s whether it’s, call it, the card or if it’s the more payment ecosystem evolving?
Roger Hatelius, Acting CEO, Fort Knox: Yes, payment, really interesting, but also the insights. But I would say the full when we can really bring back value to our customers to help them to make decision and more decision makers around the company. I would say that’s what triggers me.
Charlie Brennan, Analyst, Jefferies: Lovely. Thank you, and I hope that.
Niro Dander, Head of Investor Relations, Fort Knox: I think we have one last call here. Bharat from Cantor. We’re running out of time. So two questions I think we have time for. Good morning.
Simon Grenard, Analyst, ABG: Good morning. Thank you for taking my questions.
Bharat, Analyst, Cantor: Out of the 13,000 new subscribers added, how many would you say are like sole trader businesses? And how many are, let’s say, one to four employee businesses? I’ll go one by one, please. Thank you.
Roger Hatelius, Acting CEO, Fort Knox: I don’t have the numbers, but it’s a similar pattern as we have had before. We don’t see any changes in the type of customers that we grow with. So yes, same as before and no big difference in the, how do you say, branches either. So it’s similar to what it has been before.
Bharat, Analyst, Cantor: Sure. And in terms of like the increase in usage that I know you want to focus on makes sense, of course. But just wondering given a lot of your customer base is like the sole trader business is like 60% approximately for the CMD and a further 30% is the one to four employee. What kind of ARPC contribution do you expect from the sole traders and one to four employee businesses?
Roger Hatelius, Acting CEO, Fort Knox: We think it could be a lot. Today, we can have one of those sole traders as an example. The only user could be the accountant. And we bring really much value to the accountant, but we have much more value to bring to the sole trader himself or herself. So there are more decision makers around the company that haven’t found the value from Fotnax yet.
Bharat, Analyst, Cantor: Is there a number you can provide on like let’s say the ARPC contribution from these sole traders like in a futuristic scenario that you can expect?
Roger Hatelius, Acting CEO, Fort Knox: I wouldn’t give you any. No, no, sorry.
Bharat, Analyst, Cantor: Okay. Thank you.
Niro Dander, Head of Investor Relations, Fort Knox: Thank you. And just to clarify as well, if a client wants to postpone a supplier invoice payment, does a partner handle that or is it for Knox? If they postpone a supplier invoice?
Roger Hatelius, Acting CEO, Fort Knox: If
Niro Dander, Head of Investor Relations, Fort Knox: If a client wants to do that, who handles that?
Roger Hatelius, Acting CEO, Fort Knox: And then we handle that if it’s a business to business. But if it’s a business to consumer, then we have a partner.
Niro Dander, Head of Investor Relations, Fort Knox: Okay, good. Thanks for clarifying. That was all we had time for today. Of course, if you have more questions, feel free to reach out to the IR department. We are very happy to answer all your questions.
Thank you, Roger, and thank you to everyone who listened in and watched us today. We will be back here in the studio for the Q1 report on the April 24. Thank you very much and have a very, very good day.
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