Sales beat our forecast by c2% due to stronger-than-expected growth in Core Transactions, Pengar and Marknadsplatsen, while Core Subscriptions matched our forecast. The organic sales growth was 30%, fueled by previous price increases and strong momentum in the non-subscription revenues. As an acceleration of the growth in Pengar, where the potential ARPC is more than 10x higher relative to other parts of the business, is essential to the case, the better-than-expected outcome is the quarter’s highlight. According to management, the accelerating growth in Transactions and Pengar is in line with its expectations.

Marknadsplatsen beat our forecasts as well, following solid momentum in both Offerta and Integrera. However, the new, more Fortnox-like subscription alternative introduced in November has had no major impact yet. Nevertheless, we believe the new low-cost subscription-model, where Offerta customers pay for usage, reduces the hurdles of starting to use Offerta and will be positive for growth over the long run.

The ARR was SEK944 and grew by 3% q/q, roughly in line with the growth in the number of customers. We believe that indicates the q/q growth in Core Subscription will be around 3% as well, implying SEKc230m in Core Subscription sales in Q1 2023.

Net customer intake was 14 000 (15 000), slightly less than our forecast of 15 000. Management does not see any meaningful effect from increased bankruptcies and no increase in churn. Thus, the slightly lower intake y/y is likely just a normal variation.

With a gross margin in line with our forecast and slightly lower OPEX, both regarding Other external costs and personnel expenses, EBIT beat our estimate by c7%. The EBIT margin was 35.3%, an increase from 31.1% in Q4 2021.

While having a very solid EBIT margin, Fortnox invests in products that are not yet in use and not yet generating revenue. For 2023, Fortnox expects to launch at least seven new products. See Fortnox’s Q4 2022 presentation (page 50) for a larger picture.

We raise our sales forecast by c2% for 2023 and 2024, as we expect higher sales from Transactions, Pengar, and Marknadsplatsen. We believe the positive momentum in these segments will continue to be driven partly by new initiatives. However, lowered forecasts for Core Subscriptions offset the positive effect somewhat.

We leave our OPEX forecast flat and estimate Fortnox will add a net of 120 employees during 2023 compared to 90 in 2022. According to management, the ability to find the right person and to onboard is the limiting factor rather than financials. Considering the big layoffs in some unprofitable tech companies, there might be an opportunity for Fortnox to add some extra talent.

Overall, we raise our EBIT forecast for 2023 and 2024 by c2-3%.

We raise our Base Case slightly to SEK60 (55) on the back of increased forecasts.

Fortnox’s Redeye Rating remains at 4,5,5 (People, Business, Financials) in the updated version, and the WACC is unchanged at 7.5%.

Trading at ~17x sales 2023E, Fortnox is the highest valued business in our comparison. However, we believe that is for good reasons:

We believe the three last factors give Fortnox a competitive advantage that most other Nordic SaaS businesses lack, making Fortnox able to grow with rising margins for many years. That should result in a premium relative to peers on 2024 sales and earnings.

On the other hand, the premium toward the Nordic SaaS median is among the highest we have seen. While Fortnox’s pricing power, which the recent price increases have highlighted, motivates a premium, we believe investors should be aware that Fortnox’s valuation multiples have remained largely unchanged, unlike most SaaS businesses.

Unfortunately, there is some error in the data regarding Fortnox in late 2021. However, we believe the figure is nevertheless useful.