Welcome to this live queue with Formpipe. I will be back later for the Q&A session. You can already now post your questions in the function below the stream. Now it's time for the CEO, Christian Sundin. You're welcome.
Thank you very much, Fredrik. Hi, everyone. I guess it's that camera that I'm even though it's not lighted. Okay. Hi. Hi, all. Thanks for joining. This is the regular update from our latest quarterly report or the annual statement for the year and Q4 in specific. I will jump right into it. What's the highlights? Yeah, a very solid highlight is the amazing ACV we do in the fourth quarter of 2022. An ACV of SEK 24 million, it's a record high ACV in this quarter. It comes both from the public sector and the private sector, so it's a combined effort from all our business areas.
For the year, it brings us to an annual growth of the ARR to 22%, which is really strong numbers. During the quarter, we also taken two significant strategic orders in the public sector. They secure our sustainable growth ahead for the public sector. In Denmark, it's the already communicated Landbrugs Styrelsen deal, that is four plus three years and estimated of to a value of DKK 80 million-DKK 100 million over this timeframe. Then it's a state agency in the Swedish public sector with very extraordinary security, information security requirements that has chosen us for both case and document management and e-archiving. That makes us really proud and proves our position as a leader in secure information management in the public sector.
It's a 10-year deal, with an ACV of DKK three and a half million. We see a lot of potential of growing together with this customer over the time. Two really great deals that proves our strength in the public sector market. In the private sector and in the banking industry, we have taken our two first orders together with the banking system Thought Machine and Mambu. It's two very interesting banking system, quite newcomers, strong growing banking systems. They broaden our potential customer base. We already have, as many of you heard, a very, very strong partnership with Temenos. This is adding on the potential for us to grow outside of that and with Lasernet help even more customer in the banking industry with document management.
Really great traction on those, and we're looking forward to really harvest that potential going forward. Really good with those two. This thing's really working. Can we help? You know, I would need another clicker. Going into the numbers, the comparison from last year, we had a really strong, for those of you who remember that Q4 last year, that was especially on the delivery side, but all over the place, it was a really strong quarter. We had a tough comparison this year. However, we have a strong trend, and we are delivering growth from last year.
As come as no surprise to you, the traditional license sales are continued to be a less part of our total revenue. SEK 3 million in from the lower in traditional license in this quarter than previous year. That's one explanation of that the growth is not even stronger. Also we had, as you can see, and compared to the other quarters there, you can see that Q4 was standing out last year in delivery revenue. We're not really pushing that hard for delivery revenue, we're pushing for recurring revenue as you know. Recurring revenue, that's a 15% growth compared to last year. Strong growth in that, and that growth primarily come from our growth of the SaaS.
Delivery revenue, as said, slightly down, but there's also a slight hiccup in the public sector of Denmark there. Actually, it's due to that we've launched a major product release of our grants system task there, where the Danish public sector has completely redone their bank ID, MitID solution for the digital signatures in the society of Denmark. That has taken some focus of our delivery and put that on product development efforts instead in order to meet up to the customer requirements.
We see the light in the tunnel on that and brighter times ahead on that. License revenue, as I said, trending down, continuing to do so, all in line with our strategy, all are in line with our strategy of pursuing software sales as service rather than selling traditional license. It's also fair to point out that we now see that trend also happening in the public sector. We've seen it for quite a while in the private sector with Lasernet. Now we see in this quarter that we are producing really strong ACV on SaaS also for the public sector side of the business, which is a really good thing in the long term for us. When it comes to the cost side of things, we are at a turning point.
We were ramping up capacity starting with the growth initiatives two years ago. We've ramped up capacity, and thereby we see an increase in staff costs in this year compared to last year. This is now flattening out slightly going forward, meaning that we will from now, from this low point in profitability, we will come to better margins ahead. The sales expense are also up. That's mainly driven by kickbacks to partner. It's a good thing since it shows that our partners are selling great for us. We're growing, as you can see, and thereby the partner kickbacks is also increasing.
Other costs are higher, mainly marketing efforts that we increased the activity in the market to pursue the possibilities we have of growth in the market. It's also that we're hit by the U.S.. .$ compared to the SEK shift, where a lot of our product development cost is in US $s, while the, for example, in Sweden, the revenue in the public sector is completely in SEK. We're naturally hedged in a lot of a big part of our business, but when it comes to product development and when it comes to the sale in the country Sweden, yeah, it's, we're slightly exposed to currency fluctuations. That is quite significant amount actually that hurts our margin right now.
Total costs are up, all in line with our plans, and thereby the profitability are at a turning point. We will see from now on and onwards, or actually the turning point, as you can see on this, was already in Q3. That was the lowest point. From now and onwards, with the strong ARR we're having and we have produced, we see the revenue growing faster than the cost going ahead. We will still continue to recruit people and increase the capacity, but not at the same pace as the growth will come from the revenue increase from the ARR rate. I've spoken about growth of recurring revenue, and that's of course our main focus to grow the SaaS and thereby the recurring revenue.
It's of our total revenue, it's more than 65%. We are growing year-on-year with 15%. We have a compound annual growth from 2014, about 10% year-by-year, quarter-by-quarter. Now it's actually with a buffer of it's going up to 11%, 12% the latest period. We're the compound annual growth are we're showing a really strong track record of being able to deliver growth and recurring revenue. The recurring revenue now covers more than 80% of our operating costs. Of course, that gives and provides stability and lowers the risk in the business.
From the investment phase in increased capacity, we also here see that the downward trend is broken and increased margins will come ahead from this. I've already touched base on the ACV. Record quarter at SEK 24 million, both as SaaS, but also increased support and maintenance. Increased support and maintenance very much comes from the landmark deal with Landbrugsstyrelsen that we already mentioned, so that's a significant amount in that. Then, as also pointed out, public sector is starting to really move on on this. We're providing to the ACV as well, while we've seen for a long time private contributing strongly to the ACV and the ARR growth in the business.
At the end of the year, we have a kicking SEK 369 million in ARR. That's a 22% growth since last year. When we come to SaaS in specific, we can see the shift in the trend from 2020 to 2021, where we launched our accelerated growth initiative, how we have elevated the growth of ACV quarter by quarter from this initiative. The investment in capacity really pays off in ACV and thereby ARR.
I think that, with the SEK 11 million here in SaaS growth in the quarter, that's a strong number, but I think this shows even stronger. If we come to the Lasernet SaaS ARR where we see an even clearer shift from the investment in capacity, and that's really where we put our effort on growing globally with Lasernet. Here we see a compound annual growth rate since we launched that initiative of 65% in growth. As you see, coming from low 30s to now, about SEK 80 million in ARR in only two years, is quite a solid accomplishment. I think I'll leave it at for now. We're very well on our path.
We see line of sight of our financial targets that we launched with that initiative as well. As I said, at the turning point, now greater margins ahead.
Thank you very much, Christian. Once again, I want to highlight the opportunity to ask questions below our stream. I want to start with the new deals with Lasernet within the banking industry, Thought Machine and Mambu. Could you tell us more about those companies, and also what's the potential with those companies?
I mean, they're very, very interesting actually. There's two newcomers, two new kids on the block in the banking system world. They are growing a lot. They are addressing not only the neobanks, even though they're very successful on the neobanks space, but they're also addressing the other traditional big banks. They're really interesting, new technology. I will encourage you to Google them both and see them. I mean, they're two really interesting companies, two really interesting banking system. They come to us, actually. They've seen Lasernet, what that can do on Temenos. They understand the value we provide with Lasernet and seamlessly integrated their platform so that they work fine with Lasernet.
That's how we see it. We feel really strong support from both of these, yeah, energizing companies and to work with, really. We see great potential in that. Of course, Temenos is still in very much our core partner in the banking world. We feel strongly about Temenos, and Temenos is, yeah, is a team permanent as well. That's, this is an add-on thing, broadening the potential for us even more.
Okay, interesting. I guess you could say it's some kind of indication also that your product is strong within this niche as they came to you, or?
Yeah.
What's your view on that?
I mean, we have a view that we've really invested in trying to make our API more easily for other ones to adopt to. It's nowadays easier to put Lasernet on any platform, banking platform or ERP system. I mean, we have a strong focus on Microsoft Dynamics and Temenos with our close partnerships there. However, other ERP system and banking system can use Lasernet and thereby increase the value of their proposition towards their end customers. I think we will see more and more of that the coming years, even though we still put all our focus on our close partnerships. Yeah, it's interesting, and it's broadened our market potential and increases it.
Okay. As you mentioned, you had a very strong ACV in the quarter, the public sector was the main driver. You have mentioned some really large orders, I would say that the underlying performance seemed to have been quite strong as well. Could you elaborate a bit? Is the public sector more in favor of SaaS solutions?
Yeah, yeah. We think we see that. We're pushing for it as well. It's not always true SaaS. It could be that the business model is more like a hosted at the because of security reasons and so forth. It might be something they actually run themselves. The business model is more and more what they ask for to be comparable with the SaaS world. They want to buy it as SaaS, even though it could be a fenced-in SaaS world, so perhaps not completely out in the Amazon or Azure cloud when it comes to especially the high security requirements that many of our customers has, and also from a country perspective.
It's still really good for us, for the scalability of things, and in order to make sure that all customers are on the same version of our systems, because that means that add-ons can easily be sold on top of that rather than they get stuck in older versions. Thereby, it's a really good thing to see this trend shift in the public sector space as well. That really helps us to be more profitable and more scalable and add on sales on top of our customer base. Yeah.
Okay. You will leave as CEO. You've been CEO for 16 years, right?
Yeah. That's quite a while.
Why now? What will happen to Formpipe? What should we expect in terms of strategy and so on? Will there be any changes?
Well, well, it will be a lengthy answer, but I'll try to cover all the Lego bricks of this. I think we need to go back two years in time from where we launched the growth initiative and ramping up capacity. I mean, we did that a little more than two years ago, and as you've seen on the graphs, we executed quite well on that path. We're now at, as I told you, the turning point of the profitability. We've made the investment, and now we will reap the benefits from it going forward. And with that, we also transformed the business model in Sweden public sector from being a delivery by partner to make our own delivery.
That has also been an investment and something that we have shifted the entire organization around. We're now with all our business area in an excellent place with solid plans ahead. We have great people in place, great organization, and solid plans going ahead. The timing of doing a shift, my predecessor or the one who will come in after me will have time to learn the company in due time. There's nothing broken that needs to be fixed. It's actually a well-oiled machine that works and have solid plans all the way sort of up to 2025, and where we'll see this us moving towards the financial targets.
It will give the person time to get acquainted with the company and then, yeah, then there will come a new shift or how do we elevate this company beyond 2025. That work needs to start somewhere up to that time. I think getting in new ideas, insights from other companies during this process without being in stress or having something to fix, I think that's quite good timing to make a shift.
Sounds reasonable.
Yeah.
You touched it just recently. The public sector in Sweden, the deliveries, I think they almost doubled in this quarter compared to Q4 in 2021. I mean, also I know you have high ambitions in that segment. I mean, are you satisfied with that increase, or could you tell us a bit what's your ambitions there?
Yeah, I'm very satisfied with the progress and what we have accomplished with public sector Sweden and the business transformation. we see still future growth ahead, not at in the same, not doubling next year. That will not end. we will move on this path. We will be, yeah, what do you say, a full service provider or a one-stop shop for digitalization for the public sector or our current customer base in both Denmark and Sweden. always been in Denmark, so we're sort of copying the same setup that has been very successful in Denmark.
That's what we're now doing in Sweden as well and getting closer to the end customer, get the innovation power that they can provide back into product development, building new features, functions, and modules that we will sell to the entire customer base in public sector. It will be a healthy, profitable growth ahead in public sector, both Denmark and Sweden. That's what we see.
Okay. Last call for any questions from the audience. Could you tell us a bit about you see some delays in Temenos deals as you also did in last quarter. I mean, we're in February now. Have you seen any changes to that or does that situation remain?
We still see it remain. That's what we see up to Q4, in a way. I will not start talking about Q1 with you already. We still see that there's longer lead times to decisions in the banking industry. I was happy to read Temenos report. They see the light in the tunnel. I will not comment on their quarterly report, but that's how they see it. I also read in that was a lot of to existing customers and so forth in their growth. I don't have a better indicator than that, but there is still a little bit damp on the as we see it anyway.
With both the newcomers coming in to broaden our offering, but also, I mean, the world around us, I do believe that there is a lot of potential for us. There's, as you know, banking deals are much fewer than ERP deals that are smaller and involve a lot of volume. While the banking deals takes longer time, there are normally two or three times the lead time on a banking deal compared to Dynamics deal or ERP deal. When it's now delayed, yeah, we have line of sight of a lot of business, but we don't really know when it will be closed.
What we see that is the portion of Temenos deals that are actually taking place, we are in a greater and greater portion of those deals. I mean, no one will buy Lasernet to have Lasernet stand alone because Lasernet is a product that adds value on top of an ERP system or banking system. When Temenos or Thought Machine starts to when they do sign the order, we see that we are in there to larger extent than before, and that's when we also will see the Our business coming in.
Okay, one last question, and it's from the web.
Good.
Could you give some color on the outlook for this year on a high level?
Well, that's tricky, of course. I mean, we have the financial targets that we published and what you should bear in mind that we have set out a target of 20% EBIT margin in 2025, and I've said that we just passed the turning point. Of course the trajectory needs to bring us there. We also said that the growth should be 10% a year in average over all of these years from 2021-2025. I'll just underline that we're on the path of both of these two targets.
Starting at the turning point and dotting the line up to 2025, where it should have been from 2020, 10% growth, at least, and 20% margin in 2025, at least. That's the best outlook I can provide without breaking any regulations here. For sure, we see ourself that the table is set, so and we will deliver gradually better margins. It will not come overnight. It will be quarter by quarter, inch by inch, but going forward, we will combine growth with increased profitability.
Okay, that's all from us today. Thank you very much, Christian.
Thank you.