Fortnox
Fortnox - Enhanced bundling spurs the ARPU (ABG Sundal Collier)

2019-08-22 20:41
Sales +43% y-o-y (+4% vs ABGSCe), 9% EBIT beat
Estimates up 2-5%
40% ’18-’21e EBIT CAGR, 29x ’21e EV/EBIT
Q2 was solid as a rock
Q2 sales came in at SEK 129m, 4% above our forecast of SEK 121m. Since the quarter’s customer intake of 13,000 was on par with our projection, the sales beat stemmed from a strong ARPU of SEK 154 (ABGSCe was SEK 148). We have previously argued that the ARPU should continue to increase as a reflection of 1) a gradually maturing customer base; and 2) Fortnox’s recent initiative to bundle its solutions. Even so, Q2’s ARPU exceeded our expectations, and we think the increase shows that the company’s upselling of modules is gaining ground. In terms of earnings, opex was in line with our forecast, but the higher sales brought EBIT 9% above our estimate.

’19e-’21e sales & EBIT upgraded by 3% & 2-5%, respectively
Following this report, we have raised our ARPU assumptions, entailing a 3% sales lift on ’19e-’21e. The order book was good (i.e. NTM subscriptions sales), up 53% y-o-y, but showed decelerating metrics compared to Q1. Although Fortnox has a scalable business model, we note that it has recently enhanced its marketing activities as well as ramped up its headcount. Therefore, we have left our EBIT margin estimates for ’19e-’21e relatively intact.

16x EV/sales and 48x EV/EBIT on our revised ’19e estimates
Fortnox has a market-leading position and we remain believers that this will persist given its low churn rates (we estimate <5% churn) and broad product offering. although the y-o-y growth in the customer base continues to decline (largely due to a maturing market), we expect further arpu increases to spur sales growth. we estimate an ’18-‘21e sales cagr of 27%. here, the key driver is upselling of products, but we also see long-term potential in terms of hiking prices, which could entail upside potential to our estimates.>


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