Welcome to this live Q with Formpipe. As usual, you have the opportunity to ask questions below the stream, and I will be back later for the Q&A session. First, it's time for the CEO of Formpipe, Christian Sundin, to present the second quarter. You're welcome.
Thank you, Fredrik, and welcome everyone. Thanks for joining. I will jump straight into the numbers from Q2, the report we published this morning. Some highlights. As we communicated now for some while, we have left the high investment phase of our growth strategy and are now flattening out the cost while the recurring revenue is bringing the margins upwards. This quarter is another proof of that. We're on that trajectory right now, where we deliver an EBIT of SEK 13 million this quarter to compare with last year 0 in EBIT.
Looking at where the growth comes from, it's very nice to see that the major part of the growth comes from our recurring revenue, which is in line with our strategy to drive recurring revenue, of course. 21% growth in recurring revenue. Looking at the SaaS recurring revenue alone, it's actually 45% growth on the SaaS line. Also really nice to see. Even more so, all business areas are delivering according to plan and are on the right track and provides and contributes to the improved margins that we are delivering here. Everything's jolly good from that perspective. Going into the actual numbers here. We are delivering a strong top-line growth of 15% or SEK 18 million compared to Q2 last year.
As already noted, it's the recurring revenue that grows most rapidly, and SEK 60 million up from last year, and it's primarily from SaaS, but also some growth in the support and maintenance revenue. We have a one-off deal on Lasernet this quarter that happens every once in a while, even though we are really pushing for SaaS deals every now and then, and particularly banks like to buy a traditional license anyway, and then we agree on that. That boosts the quarter slightly in terms of revenue. On the other hand, also in line with our strategy, we are continuing the path of pushing more and more deliveries to our partner network within private.
A SEK 4 million decline compared to last year on delivery revenue nets down the traditional license revenue that we see in this quarter. That's a really good thing. It gives our partners more work, and that also makes us having a more scalable business, pushing the delivery to our partners and getting more feet on the ground out there in the market to push mainly Lasernet out in the world. In total operating expenses, they're up 3% from last year's Q2. If you have had the chance of already reading the report from this morning, I in the comments say 4%, but that's because I calculate without the capitalized development cost. Taking those aside, it's a growth of cost of 4% compared to last year.
The strong development in revenue and controlled cost expansion, I mean, we mentioned it before. We do not see great reason for adding a lot more people or cost into the organization in order to execute on the growth that we're aiming for ahead. With the operations, mainly that we built the organization we need in private. Now it's more we will still add people in delivery of public sector Sweden, and we will join more and more for further market expansion in the private sector business. There will be added heads and added cost, but not to the extent that we've seen previously.
With the strong growth of ARR and the recurring revenue coming with that, we see that the profits will continue to and the margins will become better and better over the coming periods. EBIT is up SEK 30 million from zero last year, as already noted. Growth in recurring revenue, I always like to show this. It's a strong growth we're having, and it's 65% of our revenue or more right now. It's actually 69% right now. Growth year on year, 17% in recurring revenue. Since 2014, we have continuously grown the recurring revenue with more than 10% in compound annual growth rate over that time period.
However, the investment we did in further capacity for boosting growth we did a couple of years ago has given a real effect, and we have grown the growth rate up to 13% the two last years on recurring revenue. Now it covers more than 85% of our fixed cost. As you can see in the line here on the graph below, the downward trend on profitability is broken and the trajectory now will continue to go upwards for the coming periods. Looking into the actual quarters, quarter sales or the ACV, which is the ACV for this quarter, we have a solid SEK 11 million in the quarter. It's actually quite good sales. As you can see, there is SEK 22 million in added sales.
However, we also see some churn in the quarter. In private sector, it's mainly about some of the customers churning on maintenance in order to move to SaaS. There are also several customers that are actually in the financial time where we are right now. There are companies struggling, so they decide to terminate their support and maintenance agreement with us, or actually customers going in bankruptcy. We see a couple of those as well in this quarter. On the Swedish side, we have actually proactively by us terminated an agreement with a customer on a custom-specific solution where we didn't see good. We couldn't deliver on that in a profitable way for us.
That is a one-off in the quarter. The underlying sales in SE Public, which says zero here, but it's actually SEK 3 million and then netted down with the SEK 3 million of a, for us, a good churn actually. We can see Private on SEK 4 million in this quarter, as I said. The underlying sales is bigger, but it's also affected of churn. Then we see Denmark Public delivering yet another really strong ACV quarter. It's mainly coming from upselling to existing customer on a new frame agreement and securing the relationship over many years ahead on increased users, increased functions for the customers. But there is also new customers in hidden in that number. Yet another really strong quarter by Denmark on the public sector there.
Ending the quarter, we can see an ARR of SEK 406 million, or actually 22% up from last year. Of course, that's something that will brings great comfort in the future and our future revenue recognition of recurring revenue going ahead. As we have shown before and continue, and this includes FX if you don't recognize the SEK 14 million in ACV here. But there is a SaaS ACV in this quarter of SEK 14 million.
As you also can see here, from starting the investment phase we did in order to increase capacity in the market, comparing the years 2018 to 2020 with the year 2021 up to now, you can see there is a great shift upwards in what we bring in in added ACV every quarter from that point. Looking on Lasernet specifically, where we put most of the investment for SaaS growth, we have a compound annual growth rate for these years of 55%. It's really a strong growth we see in Lasernet as SaaS.
Summing this up, we comparing this to our financial targets, yeah, the average annual growth rate that we communicated that we should achieve over the years 2021- 2025, I think we can see clear evidence of that we are on that path and that we will reach that target. 70% of our revenue should be recurring revenue coming 2025. We're already on 69%, so I would say that's in the bank. Then I think this report clearly shows that we are on the right path of the EBIT growth as well, and the trajectory ahead will lead us up to achieving this number of 20% EBIT or more in 2025. Given that fact that we will reach that, of course, we are a cash-generating company.
The EBIT is a cash EBIT. Thereby we will return to giving dividends to our shareholders ahead. We have set out to over time pay out 50% or more of our profit over time. Do we feel comfortable in all of this? Yes, we feel great comfort in this going ahead. Thanks.
Thank you, Christian. Once again, I want to highlight the opportunity to ask questions to Christian through the chat function below the stream. I want to start with the strong ACV in the public segments. I mean, you touched upon it, but we've seen this trend for several quarters now that you have a strong ACV, particularly in Denmark. I mean, could you elaborate a bit what's driving those numbers?
Yeah, it's actually an opportunity we have with renegotiating on a new frame agreement that came in place, I think a year ago. We're meeting up with our customer. They see the benefit our software provides and what we have built in add-ons over the years, meeting them and discussing with our customers on how can we use our software more, how can we get greater value of it. So many customers realize that they can use our software for even more tasks, and thereby it will be upsell opportunities. There is also a matter of price. The new frame agreement is more favorable for us, meaning that we have an opportunity of yeah, charging the customer higher price per user and per module.
It's us executing on the frame agreement that came in place a while ago.
Okay. Would you say
That also includes securing a lot of the. It's both new customer and existing customers. But these are long-term extensions. I would say in average, we're extending every one of these customer that were on the new terms for four years. It's to secure the relationship and have the opportunity to upsell even more over that time period. It's really good for us.
Okay. Would you say that this is a general trend in the Danish market, or is it that you have succeeded in convincing your customers that your additional modules and so on can create additional value for them?
I wouldn't stretch it that far as a trend. I think it's us working with our customers and they realizing that our software is providing great value to them. We've taken the opportunity to renegotiate and get better revenue from each and every one, and also won a couple of new ones or sold another add-on module to existing customers and so forth. I wouldn't see it in a macro context here, or a trend, really. I think we should just see it. We've been really successful the two past quarters, and yeah, hopefully we will be going ahead as well, but it will be hard work and to do that as well, so.
Okay. Now let's move to the private segment, which had an ACV that might be a bit softer than what we have seen. However, you mentioned that one Lasernet customer chose to go for a traditional license instead, and that, of course, is impacting. I mean, you mentioned longer sales cycles, for example. Is that the main explanation for the somewhat softer number, or is there anything else you see?
Yeah, I tried to elaborate a little bit on that and explain it in the comment in the report. What we see or what our partners are telling us is that there is longer lead times. That's clearly what they tell us and what we reckon here. There is also I mean, Microsoft Dynamics is gaining market share, and that's still as we see it a fact in the ERP market. However, Microsoft Dynamics has two different ERP offerings, two completely different system. One is called Microsoft Dynamics 365 Finance and Operations, and the other one is Dynamics 365 Business Central. Historically, the Finance and Operations, or F&O, has been the bigger ERP system addressing multi-country global organizations in manufacturing and so forth.
While Business Central has been very strong on SMEs and mid-sized also large-sized companies, but slightly smaller and it's more packaged solution, less configuration and so forth. Over the years, what we see right now is that when customers are faced with the opportunity to choose between those two, we see some movement towards Business Central. Our historic USP here has been on Finance and Operations. However, Lasernet is making the same contribution or complementing the Business Central just as much as F&O. Technology-wise, it's not a difference. To use Lasernet on Business Central, we are really strong there as well.
It's more that historically our partners has focused on selling F&O, and now more customer are choosing Business Central. Perhaps then there are partners that system integrators that are having a history of being really strong on Business Central. Our partner network has been very much focused on F&O. For us now, it's a matter of. We see that our partners really want to move more to Business Central to have that as additional offering to their customers. But it's also a matter of us of recruiting or finding more partners that are really strong in delivering Business Central. In the short view, this is slightly hurting our ACV right now.
On the other hand, it really adds a strong market opportunity for us and with Lasernet going ahead. For us, it's actually long-term a good thing that this is going on.
Okay. Interesting. I mean, approximately, for how long do you think you will see a negative short-term impact due to the focus on Business Central?
We can't really, for two quarters is not enough statistical data to say that this is a strong trend. It could be just two quarters where we have lost out, or our partners has lost out on a couple of deals to where they have not offered Business Central. I wouldn't over-exaggerate that to say that this is a really strong trend. We're up to, if it's a trend, we're up to meet it, and we will bounce back on it. However, there are also quite a lot of positive nuances from our partner network coming, and the outlook for the autumn as well.
I wouldn't see these two slightly softer private sector quarters as a trend in any way. I think we're due to bounce back strongly on private.
Okay. Let's continue with the question from the web. It was sent to us in Swedish, but I will try to translate it. What are the biggest challenges for the new CEO in your view?
I mean, I do believe we have a very solid business plan for each and every business area right now, and all business areas are executing accordingly. I think Magnus will have plenty of time to get to know the business, learn the people, understand our customers and partners, and then continue to execute on the plans that are already present. After doing that, his experience and knowledge will add another injection into the Formpipe journey ahead, I believe. Challenges, I don't really know. I mean, it will be the daily challenges in the market or at our customers and so forth.
I don't really see one major challenge right now for him.
Okay. Once again, I want to highlight the opportunity to ask questions in the chat below the stream. Let's continue with deliveries in Sweden. That has been an area where you have a focus on increasing your capacity. What's new there? How's the work going? I mean, it was a quite tough quarter, in terms of working days, but still, I think you increased your delivery sales in Sweden somewhat year-over-year. Could you elaborate a bit on the situation?
Yeah. We're doing a great job on that, and it's actually what we've been working with is the billability to be more productive and efficient in our delivery organization. I mean, we come from a time where we didn't do that as well as we're doing right now. 1.5 years ago, we acquired one of our partners, Ultimate, and then we got the experience and knowledge on how to do that. It has taken some time to adapt to that way of working and so forth. The majority of the growth here right now is not us adding more people. We're quite the same number of people, actually, in deliveries as last year in Sweden.
It's a matter of doing it more professionally and with better productivity. The add-on with more capacity, we're doing that in a very controlled way, and we'll continue to do that. We'll continue to add resources, but doing that in a very controlled way going ahead over the coming years in order to be the full service provider to all our customers that we want to be a couple of years from now.
Okay. Let's move back to Denmark again and the Landbrugsstyrelsen deal. I mean, how has it been so far? I mean, there was some mix between deliveries and support and maintenance and so on. What's your key takeaways so far?
With the new agreement, we also took over another system integrator's work at Landbrugsstyrelsen, which was their own configuration, customization of things outside of our core product. We're also helping the customer with that. We now, during the spring, we've been having both the old agreement and the in place and doing quite a lot of work on that. From the first of June now, we are on the new agreement and have taken full control over all the code that the other system integrator had built. Now we've documented that. We have it fully working with the entire solution at the customer.
Customer and us are really happy with the collaboration and see many years ahead of a really strong collaboration there. In terms of outlook on revenue, I can't really provide that for you. The solution is now in place, and we have full control over it, and we are now working on the new agreement. That's good.
Okay. Last chance to ask questions through the chat. And I mean, in general, we have seen or at least expect a slower IT consulting market in general, while the public sector seems to be doing quite well. I mean, is there opportunity for you to acquire more talent as the competition for employees might decline somewhat? Talking about the Swedish market in particular.
Yeah, as I said, we will continue to recruit, but we're doing that in a very controlled pace. We will add on more people, more capacity over the coming years. We are also very keen on not breaking the chain, which we did a couple of years ago and sort of failed with that scale up of the business. We will do this in a very controlled manner. There will be more and more people driving more and more delivery revenue in the Swedish public sector business, going ahead.
Okay. Thank you very much, Christian.
Thank you, Fredrik. Thank you, everyone.