Welcome to this live queue with Formpipe. I will be back later for the Q&A session, and you can already now post your questions below the stream. Today I'm joined by CEO Magnus Svenningsson and CFO Joakim Alfredsson. Magnus, I think you will start the presentation, right?
Yes.
You're welcome.
We do as we always do. Then we have you, Joakim, coming in with some numbers, then I talk a little bit more about the developments and then the Q&A. Of course, really good to be here and see you again after three months of doing business and also having a bit of vacation and summer before starting off the new season. So if we look a little bit at the numbers, first of all, we have the net sales, SEK 130 million. I think this is a good number, given our changes in operations and customer mix the last year. Also, I would like to emphasize the recurring revenue.
We are now up to more than 80% of our net sales being recurring revenue, and I think this is a really, really good sign of Formpipe developing in the right direction. Then, of course, our SaaS revenues, again, developing very nicely, and this is also something that we work very hard to continue this momentum in the top-line development. Finally, for this slide, the profitability, 12% out of EBIT, and there we have this quarter a few one-offs regarding reduction of personnel in our public business area. I think this is a good sign that we can be a bit more efficient as we go forward.
This was a short summary, and Joakim will of course talk a little bit more about these numbers in a bit. If we then look at the highlights, we have had a few new contracts, and I would like to mention that we did some new sales to our Danish municipalities. We also got an extension from Lantbruk Styrelsen and this is a contract that we've been talking a lot about. This is not a too big thing, but it is a sign that we have a good development, good relation with the client, which is still an important contract for us. Small step in the right direction, and then we have also made extensions in the Swedish defense sector.
That was a few deals that came in, and given that the ACV for public was zero, that is also balanced by a few churns in Swedish municipalities that we've been aware of for quite some time. If I then look at the Lasernet business, we did around a dozen deals there, and we did two deals in bank and finance. This is not really good enough. We can do better there, but it is also given that it is the third quarter, a little bit hard to explain, but it is a lot of vacation.
We had a fairly good Q2, so we see when I look forward and look into the pipeline, I'm still positive around the ACV development going forward for the next quarter. Then we have also intensified our development in our One Public, which Joakim will talk a little bit more about, but it is about modernizing our case and document management platform, where we made some progress and some extra effort during the quarter. And then after the period, as we press released the eighteenth of October, we had a cyberattack, and there are no new news there. What we said in the press release still holds.
We have our Danish IT team and our U.K. IT team working on this, and I really want to extend my thank you for the hard work you are putting into mitigating this, and we have contained this to the internal servers. There is no external leakage of customer data, so still stable situation. And then finally, we recruited our new CFO, Sofia Reinius, which I just would like to give a warm welcome, and here today with us, we have Joakim, who has been very helpful in getting Sofia up to speed, which I really, really, I'm really, really grateful for that. With that, Joakim, I was planning to hand over to you to let us indulge some numbers. So the stage is yours, Joakim.
Okay, um-
. Well, still here. Yes, some more numbers, details on the numbers. We see a clear positive uptick in the underlying profitability in this quarter, which I find very, very nice. Like minus 0.2, we still see very continued good growth in the SaaS line in particular, and SaaS is, as you can see, driving the recurring revenue base here, with the support and maintenance holding relatively flat over a long period now, but SaaS is adding SEK 10 million from last year, which corresponds to 30% growth, and the delivery line, we talked a lot about this in the last couple of quarters. We see really strong improvements in the delivery efficiency and availability now in this quarter from the previous quarters.
As you can see from the numbers, it's still SEK 2.5 million lower than last year, but we need to keep in mind that we have a changed setup from that period. Q3 last year, we had just started up the new agreement with Lantbruk Styrelsen. We were sort of closing down the old agreement and starting up the new agreement, so we were basically working on two large agreements at the same time, which we did for almost a full half, second half year there. With this new setup, we've had some bumps in Q1 and Q2, and we now see clear evidence of improvements in the third quarter, which is really good. It's also a vacation period in this quarter that brings the number down.
My view is that this positive is tracking the right way here. Summing the revenue, we grow by SEK 6 million from last year, corresponding to 5% growth in total revenue. The operating expenses increased by SEK 2.5 million, primarily within the marketing and the development side of things. Other than that, we can see that the increase is relatively shy in this inflationary landscape we're in. Happy with the cost side of things as well, and we have had intense efforts in the marketing side, particularly Lasernet in Q3, and also within the development side, both in the Lasernet business and the public sector during this quarter.
Magnus will elaborate more on those specifics later on. We recognize that we have one-off costs in this quarter of total SEK 6 million, hitting the EBIT, due to the organizational changes in public sector and, of course, in group management as well. With those aside, we see that the EBIT is increasing SEK 3 million from last year to up to SEK 16 million, and that the arrows are now pointing in the right direction. Focusing on the recurring revenue, we're now up to SEK 420 million on the rolling twelve revenue side, which and we're more than 80% covering the total revenue with these recurring contracts. Comparing to last year, we see 14% year-on-year growth on the rolling twelve numbers, that is.
And looking even further back, we still see that we have a strong increase dating back to 2014 This graph now turned a corner. We see that the recurring revenue covers more than 100% of the fixed operating costs, and we see this as a strong evidence of the scaling in the business, and that we are on the right track to increase profitability for real. Looking at the ACV for the quarter, we see that we have a negative currency effect this quarter of SEK 4 million, and the net ACV is SEK 7 million . Not a very high number. Q3 is not the most interesting quarter for us. We see that it's the SaaS line that again is what's driving the ACV.
The quarter as a whole is overall pretty soft. Private is the business area taking in the contracts. There are some roundings there that makes the numbers don't add up, but SEK 6 million increase in private and a minor zero there for public. In the private numbers, we also have the churn that Magnus briefly mentioned. We have communicated end of life of the Platina in our Life Science product, which, and we're therefore expecting some churns, and we saw SEK 1.2 million churning in this quarter. The outgoing ARR grew by 7% from last year. We're now almost up at SEK 440 million in ARR.
Sticking with the ARR a bit, we looking at some longer trends here dating back from the first quarter of 2019. We see a steady long-term growth, delivering quarter by quarter, and we have grown from SEK 213 million to SEK 440 million almost , corresponding to a CAGR of around 14% during this time frame. Focusing in on the SaaS side of things, we see that we have grown quite a lot faster, especially from 2022 and onwards. The SaaS line has expanded from 39 million SEK up to 186 million SEK, corresponding to a CAGR of 33% over this relatively long time frame.
So this is impressive, I think, and really what we're driving in the business. So Magnus, stage is yours.
Thank you very much, you, Joakim, and as you showed in your last slides, how we grow the recurring revenues, I generally believe is really, really good, and this gives us also a fantastic position to transition and develop our business under profitability. Now, we have spoken about this before. It is our Pursue Potential program, where we merge our public business under One Public business for Sweden and Denmark, and then we are overhauling the customer journey in our private business areas, which we will change to Lasernet going forward. So if you look at the public business area, it is first of all, we have made a cost reduction, so we are now a little bit more efficient going forward.
The big thing here we are doing now is that we have been working with our tech platform. As you know, we have three main platforms for case and document management, and of course, they have different qualities. They are necessary to serve the market, but it also has historically given us fairly high maintenance cost. Now we have worked with the team and with the products to see that we can extract certain functionalities and share functionalities and resources among the platforms, allowing us to primarily reduce the resources needed for maintenance of the products. Of course, when we can reduce that cost, we will invest that in new functionalities going forward. We have now proven that this is possible, and the coming...
During twenty twenty-five, we will also, of course, bring this to the customers to take this development cycle from the platform development and out to the delivery to the customer. So this is an exciting development of the public business. Now, if we then look at the Lasernet business, we have now launched into the new product packaging, and this means that we have the entry-level product Essentials, where any Dynamics users in the world can download Essentials, start working, start being productive with this, the fantastic Lasernet tool. As this person then is more confident and interested, he or she can start showing the organization that this is actually a fantastic tool and start a pay-as-you-grow customer journey. And this means a few things for us.
One is that there is no barrier to entry for new customers, but it also means that we can the customer pay as they grow, and it means that we, over time, we, we can increase the ticket size. That is the high-scale enterprise customers, there we will, can charge more going forward, whilst the smaller company can use less functionality and pay less. There is now a four-step tier with Essentials, Professional, Advanced, and Enterprise going forward. So that will be extremely interesting to see how that pans out the coming quarters when we get more and more data on usage, et cetera. I've also been to just back from San Antonio in Texas, where the Dynamics Community Summit has met up.
So it's a large number of ISVs meeting up to talk about what they do to improve the Dynamics ecosystem. And of course, it was really fun and really cool to hear the feedback we got from this with this move. So a lot of our partners came and spoke to us and said that this is a really good move. Now, in every ERP implementation we do, we can send this along free of charge. People can try it, and it's a really good sales tool for us. So good feedback so far, and for those of you who are interested, there is a little barcode here with that you can try and then download the software, or at least look, start that cycle of downloading.
That is sort of a cool thing. Now, we also have our financial targets, and we are ticking off the revenue growth, the share of recurring revenue, the dividend policy, and with the report today, we take a step in the right direction to reach our goal of a 20% EBIT margin. With this, I'm coming to the end, and I would like to give you four key takeaways before we start the Q&A. It's one, we are now starting to realize the stronger offering on our core case and document platform in public, and we do this under profitability as we move forward. The Lasernet business, we have now established a new customer journey, a new platform for continued growth, and it will be very exciting to see how that pans out the coming quarters.
And finally, as always, we continue to build our recurring revenues. So that was my message for this quarter, and thank you very much for listening in, and I think now we have the Q&A, Fredrik, don't we?
Thank you very much, Magnus and Joakim.
Thank you.
Once again, I want to highlight the opportunity to send question to us, with the function below the stream. So you touched upon it, but I think we could talk a bit more perhaps on the Dynamics Community Summit in Texas. I mean, what was your role there, and Formpipe's press and presence, and so on, and-
Mm-hmm. No, but this is one of the big, larger investments we do in marketing, is being present in this forum, where I think it is a few hundred ISVs meeting up to see how the basic functionality of Dynamics is being improved. And for us, this is, of course, an excellent opportunity to showcase what we do, but also get instant feedback from our users and our partners, because one of the cool things with Dynamics is, of course, that it is a fantastic basic functionality, but with ISVs, given the vertical, where you are, et cetera, you get kind of a very tailored experience.
And for us to see how we fit in that ecosystem, how we contribute it, that is a key really good reason to be there, and again, get this instant feedback where people say that this is... You are on the right track, or also that we have opportunities on various places. So I've been there meeting customer and partners and, of course, spending a lot of time with our team as well.
I see. So you touched upon the feedback-
Mm-hmm.
which has been good so far.
Yeah.
And you mentioned that they like to see that they can give Lasernet into the customer software suite for free initially. But, I mean, still they get revenue share from pushing customers to the other tiers. So have they said anything about how easy they believe it is to move customers up the tier?
Fredrik, that it is a really good question. It is a little bit too early to ask, but what we... so historically, Lasernet has really been the sort of the state-of-the-art product. Really, really good in its niche, really extremely competent, and we have started a lot of our sales cycle by sort of taking out low-end alternatives, like, for example, configurable documents or some of the standard functionality in Dynamics. And given this new move, we see that we can start the journey directly with the sort of the small-scale customer or the growing customer, which will then facilitate the growth. And exactly how that pans out, that is one of the really interesting things we will find out the coming two or three quarters.
I agree. So let's continue with that. I mean, you are releasing it now, but of course it takes some time before we could see a positive inflow of customers, and then probably additional time before we perhaps could see it in the numbers as well.
Mm-hmm.
You're talking about a few quarters.
Mm-hmm.
Is that, are we talking revenue or inflow of customers?
That's absolute inflow of customers. That we should be able to see, but then given our business model, where we have a SaaS and subscription model, before that trickle down to the revenue will, of course, take more time.
I see.
But this is. I mean, this is very much a. I have worked quite a bit with open source softwares, which is a sort of a freemium business model, and one thing I learned is that you do a change, and then you adapt to what you learn, so there will be a learning here going forward. But we also see companies in the Dynamics ecosystem being very successful with freemium business models, so. The first step, we are convinced is correct. And then, of course, there will be a little bit of tweaking and nudging in a different direction, pending on what partner says, pending on what end user says, to make this journey as smooth and easy as possible for our customers and partners.
Sounds reasonable.
Mm-hmm.
And just one last question on Lasernet. Historically, you have one offering?
Yeah.
Then it was three, and now it's four.
Yeah.
Why? Could you explain a bit more in detail?
Ah, yeah, well, we felt that three was a little bit too bumpy, so we said that four is probably better to get this, to get especially the opportunity to offer value at each tier, allowing us to really make a really good enterprise and advanced sophisticated enterprise that the high-end customer is prepared to pay a lot for now. Then we need to have a few steps in between there, and now we have ended up that. Maybe our first learning, that four is the right one.
I see, I see. Let us stick to private and Platina Life Science.
Mm-hmm.
You make that product end of life now.
Mm-hmm.
Why is that?
That product has served us extremely well, and it has been successful in its niche. But we see now where we are in our development with Lasernet. We see that we need to focus on the Lasernet business. We have so much to do there. Right now, we are doing a lot in the Dynamics ecosystem, but as you know, we have in bank and finance around Temenos, and we have also other ecosystems and geographical expansion lying around the corner. So we have so much to do, so we need to focus on Lasernet, which we genuinely see as promising and developing in the right direction.
Yeah, and that is also the new name of the private segment, as you mentioned.
Yes, that's correct.
Any further comments on that?
No, it is. If you have an inside-out perspective, of course, we have the public business areas, and then we do other things, which is then private. Now, for an external viewer, it doesn't really make sense. So it's a way to change according to how our customers thinks. They think about our Lasernet business areas as, of course, as Lasernet, and that's it. It's just an adaptation to the market.
I see. So once again, I want to highlight the opportunity to ask questions in the stream. So let us move on to the public segment. And I'm interested in the intensified development-
Mm-hmm.
-for cross-functionality-
Mm-hmm.
-between the three major platforms-
Mm-hmm.
You, you have. I mean, could you explain a bit, why is that?
Now, we believe that within the public sector, we have a very solid footprint. We also believe or see that we have a very good potential but in order to harvest that potential, we need to accommodate new functionality, and as we have three platforms for very good reasons, we need to adapt. We need to be more efficient in how we maintain these platforms and we do so by extracting functionality that is commonly usable for this platform, and then we maintain that jointly. Now, given that we have succeeded in that, we also see that, one, and I think this is probably the most important point, we can be more efficient in the maintenance of the product. Now, that efficiency gain, we will invest in new functionality.
And of course, when you look at public sector today, there is this continuous question around: How do we do more with the same resources? Of course, we see that we can contribute there. A challenging and a very sort of interesting and intriguing example of this is artificial intelligence, where our case managers in the future can be more efficient and get help in for example getting an overview of a new case, et cetera. And of course, we want to take part in that development and support our public customers going forward with this. And that's why this is a... We are very pleased with coming this far in the development.
Now, as everyone knows, of course, public sector, it takes time to introduce new technology, new solutions, so a little bit of patience will be needed here. But again, I thought it is really appropriate that we have taken this step moving forward.
I see. And going forward, you will make pilots with the chosen customers. Can you elaborate a bit on what will that mean for those-
Yeah.
-customers?
Well, it is in all software developments, especially when you work in markets like this, where the requirements on integrity, reliability, et cetera, are extremely high. Of course, as we have done now, you work on your platform, you see that you can make these changes, and then, of course, to really be confident and have our customer confident in that we can take this all the way over our development cycle. Of course, you need to pilot this with customers. And then when you see that you have this development flow established with some functionality, then, of course, it's easier, natural and easy to grow to new customers and richer functionality. And this is what we plan to do over 2025 .
Interesting. And, I mean, you're not, in most cases, competing directly with the more generalist IT consulting firms, but many of them have a quite weak view of the public sector currently. What's your view on the market?
Our view is conservatively positive, so as you, Joakim, as you said in your presentation, we see that we have a good start in our delivery organization for this semester, and we are planning and building for recruiting personnel and to deliver more going forward. Of course, we are a relatively small player, and we are not recruiting hundreds, we are recruiting handfuls, and we see that we have a demand in the market, and we also have a supply from the market that allows us to recruit at a pace where we can serve this demand, but also train our consultants, becoming efficient quickly and get a good start in our organization when they start serving our clients.
Okay, thank you very much, Magnus and Joakim. Okay.
Thank you very much, and thanks for listening in.
Thank you.