As highlighted today in an article by Financial Times, Fortnox has clarified its market share regarding accounting firms. In the CMD, Fortnox stated the following numbers:

In the updated material, Fortnox states the following numbers:

Fortnox’s focus – the only number stated in the original version – was the share of accounting firms using Digital Agency. However, in the updated version, Fortnox added the share of accounting firms subscribing to Fortnox products – which is considerably higher in all market segments.

While management should have clarified it was talking about the share of accounting firms using Digital Agency in the first place – which management is well aware of – we believe the data regarding accounting firms using Digital Agency is much more relevant. The key question to determine the impact of the clarified figures is how accounting firms using Digital Agency differ from those who do not.

Digital Agency is a tool for accounting firms to overview and manage their customers’ workflows. The offer is priced from SEK299 a month per user, but the Digital Agency has a much higher indirect impact on sales as the managed customers usually do some work by themselves in Fortnox’s software. In other words, the Digital Agency tool allows accounting firms to add high-ARPC customers to the Fortnox ecosystem. From the accounting firm’s perspective, Digital Agency improves efficiency.

In what way the accounting firms not using Digital Agency are working with Fortnox is more uncertain. It could be accounting firms using Fortnox for their own accounting/salaries/invoicing, testing new functionality, or serving single/a few customers. Overall, these accounting firms are not embracing the Fortnox ecosystem and are not working digitally with Fortnox as a base. Thus, from Fortnox’s Byrån (Agency) segment’s perspective, those accounting firms are not customers, so they were excluded in the first version.

To conclude, we believe the direct and indirect revenue from accounting firms not using Digtial Agency is limited. We believe a Digital Agency is a must for accounting firms to deliver high-ARPC customers to Fortnox. Thus, it does not affect our view of Fortnox’s growth potential. Considering this updated data and the data disclosed at the CMD, it is clear that a substantial share of the number of accounting firms and customers are using Fortnox in a limited and inefficient way. Thus, even though the net customer intake might grow at a slower absolute level in a few years, about 50% of the current customers are barely contributing to sales today – implying a large potential in the current customer base.

We expect a net customer intake of 15,000 (15,000) and a sales growth of 24% - almost fully organic. We assume EBITDA-CAPEX and EBIT margins of 37.4% and 38.8% respectively.

We leave our Q2 forecasts unchanged except for a slight increase in Other external costs.

Our Base Case is unchanged at SEK73.