We expect the trends seen in 2023 to continue in Q1 2024, where the soft macroeconomic environment in Sweden negatively affects transaction-based revenues while subscriptions and net customer intake are largely unaffected. We forecast 25% sales growth, fueled mainly by Core Subscriptions and Pengar, and assume an EBITDA – CAPEX margin of 40% (37) and an EBIT margin of 42% (38) - resulting in a solid R40 of about 65%. We expect a strong net customer intake of 17,000 (15,000), 15,000 organic and 2,000 from the acquired Boardeaser. Boardeaser has about 6,000 customers, but we believe a significant share already is Fortnox customers.

In short, we believe the expected ROI for Fortnox is highest for small product acquisitions like Boardeaser. Fortnox pays about one quarter’s FCF (SEK100-162m) for a product suitable for many of its customers, adding ARPC and further strengthening its switching costs. Boardeaser targets Fortnox’s larger customers but has a substantially higher ARPC, with price points around SEK500-900 per month.

Overall, we lower our Q1 forecasts relative to our Q4 Update, as we expect slightly lower revenue from transactions and Marknadsplatsen – related to Offerta having a tough market with squeezed demand from consumers. While the soft macroeconomic environment in Sweden has not changed since our Q4 Update, we probably overinterpreted the stronger-than-expected Q4 numbers somewhat back then.

Regarding 2024 and 2025, we cut our sales forecast by 1%, mainly due to lowered expectations for Core Transactions and Marknadsplatsen – with Offerta driving the cut. We assume a weak market throughout H1 2024 with a gradual rebound in H2, although Q2 will get a substantial boost from the price increases announced in early March.

We leave our OPEX forecasts unchanged but somewhat lower our gross margin assumption because of strong growth in partnership-related products and services. However, we expect a very solid 93%. We lower EBITDA – CAPEX and EBIT by 4%, mainly due to the lowered sales forecast. Nevertheless, we expect a solid y/y EBITDA – CAPEX growth of 31% in 2024.

We retain our Base Case at SEK67 and believe that the premium to other Nordic SaaS businesses is motivated by Fortnox’s excellent financial performance and dominant market position.

Fortnox has had its rather generous definition of the number of companies in Sweden (~1.5m) since 2021 and should not come as news to any investor. For comparison, official statistics estimate ~1.3m companies. In addition to companies, Fortnox’s definition includes associations of different kinds (sports, housing cooperatives). While a notable share of the ~1.5m is unlikely to need a wide range of Fortnox’s products and services, we believe some parts of Fortnox’s offering are relevant for all 1.5m organizations. In summary, could all 1.5m organizations generate SEK250 or more in ARPC monthly? Probably not. Are there 1.5m organizations needing some bookkeeping software? Most likely.

Regarding the net customer intake, which has indeed been stable over many years, we expect the market to mature in a few years. The net customer intake has been around 50,000 - 60,000 annually for several years, but it is expected to decline substantially over the next few years. We expect an average of 20,000 annually from 2026-2030, for example – where continuing ARPC growth will be the main growth driver to an even greater extent. Thus, we largely agree with the statement from one hedge fund in the article, arguing the Swedish market is highly penetrated. However, we believe it is widely assumed that the market likely will mature in a few years. On the other hand, back in 2015, Fortnox’s market was expected to mature ~2020, which did not happen. Thus, the market penetration has historically been underestimated.

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