Formpipe Software AB (publ)

Welcome to this live queue with FormPipe. I'm joined today by CEO Magnus Svenningsson and later also CFO Sofie Regenius. I will be back later for the Q&A session and you can already now post your questions below the stream. But now it's time for you, Magnus.

Thank you very much and as always a great pleasure to be here. Today is the first time we present LaserNet Group. As you know we are working with our divestment of public and are now coming closer to closing. We have named this report Continued Margin Improvement and Divestment. And before going into the LatheNet numbers, which of course are very different from the FormPipe numbers, I just want to mention that FormPipe as a group came in on 143 million SEK in revenues, and comparing that to the 130 we had last year. And then we had 28 million in EBIT compared to 16 million last year, which... leaves up that margin at 19.6% which is very close to our EBIT gold of 20% so this is to our team back home that you have worked very hard and good this quarter so we are seeing the margin improvement we want to see Now, coming to Leisenet, as I said, this are now Leisenet group that we will call ourselves. We will change name by the annual general meeting in April formally, but from now on it's Leisenet group. And good news here is that the net sales came in on 61 million SEK compared to 56 last year. And there we have a bit of a down, a headwind from the currency effect. So organically we had a growth of 13% approximately, which is a good number. And with lasers now, we also increase our recurring revenues to 91% of the net revenue. Which we are very pleased with, of course, as well. And then our HCV, we will talk a little bit more about that. It's 6 million sec. It's good. I think we can do more there going forward. But it is really a good number. We have some churns that Sofie also will talk about a little bit going forward. And then the really good thing here is the EBIT improvement that we have been talking about the last quarter that we are going to improve the EBIT. And now you can see that for yourself in the report. So very pleased with how we and the team have looked after our costs. Very, very good. A little bit highlighting then the ACV. We have done 70 new deals in Dynamics. And as you know, Dynamics has been delivering very well all through the years. So all the three last quarters has been great. very good and continue to be good so that's very very good news really really good is also that team in us and the bank and finance side of our business has started to generate business and they those are a little bit bigger in in terms of order value so they make an impact to the to the acv immediately as they they get going So very pleased to see that part of our business is now starting to move again. Also the margin improvement that we are able to get revenues in yet keeping track of our costs. And then that we meet one of the most important closing criteria. And that is moving 90% of our customers over to the new entity that will be transferred to SDG at closing. So that is a lot of hard work behind that to get there. So just shortly about the transaction now. So at closing we will receive 775 million SEK and then there is low note on 50 million running on two years and then there is an additional 25 million after a few years when SDG has got the development of their investment that they want. So that is sort of in short the transaction, a little repetition from previous presentations. I was thinking that I should explain a little bit today for some of you who haven't followed Laysenet in that much detail. I plan to talk a little bit about the Laysenet business in itself. We are around 100 employees today. We have a revenue of approximately 25 million euros. We were founded in 1989, so we've been around for quite some time with our softwares. And that is very important because this is a mission-critical software we are doing. That is, if our software doesn't work, then the supply chain stops and then the invoices doesn't go out. So this really has to be a well-proven and trustworthy software which we have and have had the chance to develop over the years and build competence around. Then we are vertical agnostic or horizontal. That means we serve basically all verticals. So a few examples. We have a partner in the U.S. called Xapt that... serves Caterpillar, they do the excavators. I've been talking about those in some of the previous reports. And when Caterpillars supply their feed service, for example, with spare parts, etc., then that is a very complicated value chain or logistic operation. And then you need to have very accurate and dynamic documents to control what kind of spare part they have millions, where does it go, where do you send the invoice, where do you send the manual. Exat has built around dynamics a ERP system that supports that flow and in that flow we are very important component to support the document handling. Another example that I like to talk about is Anaxco. It's a German partner. They serve small mid-sized logistics companies in Germany and you can just imagine how many documents you need to prepare in order to carry goods over Europe with dangerous goods, etc. And then, again, Anaxco has done a dynamic tweak that supports that flow, and we are a vital part of that. So that was two very different examples of verticals who are active. And then in the CEO letter, I mentioned also Dallas Cowboys, which is the American football, which is the third vertical. And, of course, also the bank and finance business of our side, which is sort of similar, very similar product, yet another application where we serve the need to distribute, for example, account statements and other type of documents that need to go out for regulatory purpose. So, complicated value chain or regulated markets, that's where our application is right. And then we are active, we have offices in a number of countries, Sweden, Denmark, UK, Americas of course, Germany and France. Something like 1300 paying customers out in the world and then 50, around 50 partners which then as I just explained are very important to take us to certain geographies. but also to truly understand the verticals where we are active. And this is also very important for us to have a scalable business model because as soon as you have trained the partner, part of the sales are sort of happening. They are driving parts of our sales. So very scalable business model going forward. If we look at this a little bit more technically, you can say that we have an application which is very, very API driven. That means it integrates with other sources of information, be it Salesforce, be it some sort of engineering tool, be it whatever you have in your enterprise architecture. then bring bringing that data so that a human being or a machine can read it which is of course very important to to support the supply chains out there and then distributing these documents in various forms so that is makes our applications very agnostic to ERP systems and other systems however the ERP systems are very important for our business model because that's how we enter the enterprise we get into the enterprise through the ERP system and that is a That is a key thing because that is a large investment as I said. We build our partners, we train them and then of course we see sales coming in. The ERP systems is a way in however we are agnostic in terms of how our application works. And then just looking a little bit at our customer list, which is again underpinning the fact that we are very, very horizontal. We have IKEA there. We have Caterpillar, as I mentioned. which is fashion goods and we have Continental which is in the automotive sector and then Santander Bank and D&B various banks that are using us as well so this was a short introduction to this very interesting company and there are some other aspects of this which is around our business model how we grow our ARR year after year. So that's why I hand over to you, Sofie, to talk a little bit more about our new set of figures, but with the same quality as they have always been with ARR etc.

Thank you, Magnus. Hello everyone, and my name is Sofie Vignes and I'm the CFO for FormPipe. I just want to highlight a little bit that now you are, of course, looking at numbers that you might not recognize before. So we have restated our interim reporting to comply with IFRS 5, and that means that public, including the product BG Link, are treated as business under divestment. So we have excluded public NBG link for most of the numbers presented in the interim report. And as the numbers you are seeing here, that means then that these numbers are then only constituting of laser net together with our supporting functions or group functions. So this is then the new remaining business then that we will rename to LaserNet Group. So hopefully this will make sense to you all. So if we start then on the top-hand side. Good. And I'm seeing some of these are not. Okay. I will click through all of these. If we start then on the top hand side, it's great to see the SaaS revenue growing year over year with 19%. If we looked at delivery, which used to be an important factor when we had FormPipe and the public business included. In LaserNet, we still have delivery. It's done mainly through subcontractors, so we do see some variation quarter by quarter. On the other hand, we're also then having higher costs for this as part of this. So that's included in sales expenses. So even though a delivery number is important to make sure that we can deliver and cater to our customers, it's not an important factor for us in terms of the P&L because if we do have an increase in delivery revenue, we will also have an increase in our sales expenses. So I just wanted to highlight that. so that it's clear for everyone going forward. And then if we look at net sales, so then not the total income, but net sales, we are up 9%. And then as we mentioned also in the report, excluding FX, that actually is then 13% for that organic growth, which is of course also nice to see. And then moving a little bit on the cost perspective, as I mentioned, sales expenses naturally then increases as we both have higher delivery revenue but then also of course related to the fact that we are selling more so we also have our partner margins included in our sales expenses and then we have other costs as well and as Magnus mentioned it's great to see that the margin improvements are having an effect so the work that we've been doing throughout the year is becoming more and more visible and we also then want to highlight them that we have a great Erica of 21% compare them to 8% last year so that actually shows both the continuous growth in top line but also then the margin improvements that we have worked on throughout the years or throughout the year We do have one-offs of approximately 4 million sick, which is related to the upcoming divestment of public. And that means we have then an adjusted EBITDA of roughly 8 million sick compared to minus 0.5 million sick last year. And then moving to the next slide, I want to just talk a little bit then about the laser net recurring revenue. So we are now at 215 million SEK on a rolling 12-month basis. We have roughly 89% of net sales, so not total income, but of net sales, and also 12% year-over-year growth from a rolling 12-month perspective. But I also want to highlight that the CAGR for the past 10 years in LaserNet has been over 21%. So it really shows the strong and stable growth journey we've been on in terms of recurring revenue for the LaserNet business. And in the past two years, it has been 13%. And I also want to highlight then that LaserNet Group, as a standalone business, including then supporting functions, that we are now covering more than 109% of our fixed operating costs. So that means we have a good basis for our continuous growth journey going forward. And I'm sure there will be lots of questions maybe going forward about our numbers and I will be happy to present those going forward. But with that I hand it over to me again because I have another slide which is then The ACV for LaserNet. So we have a negative FX effect of 3 million SEK, similar to last year. But it's also been, you know, strong headwinds that Magnus mentioned all throughout the year. And again, also then in Q3. We had a net ACV of plus 6, similar to last year. with an increase in SAAS of 8 million SEK and a reduction of 2 million in support and maintenance. And this reduction in support and maintenance, one of the main churns there is actually a customer called Skellefteå Kraft and it's not our own product. We were actually reselling e-docs by OpenText to Skellefteå Kraft and acting as as an intermediary there, so we had an agreement of 1.2 million that churned, but we also had selling costs of about 900, so that means we're losing a margin which was roughly 26%. So from an ACV perspective, the 1.2 million is of course large, but from an overall P&L perspective, it doesn't have that much of an effect. And we will come back to more information about these, you know, other revenue streams that we have. I mean, most of our ACV is coming from our core businesses and our core products. And I mentioned before last year we had the churn of a thought in our life science. So there are some products that aren't key for us, that we still have a little bit of ACV and revenue, but it's a very small portion of our total ACV. And that means then ending Q3, we had an outgoing ARR of 220 million SEK for the Latinx group, which is then a 7% increase compared to last year. And that's despite then the negative headwinds of FX that we are having. And with that, I'm handing it over back to you, Magnus.

Thank you very much, Sophie. And I'm just about to sum up this because I spoke quite a bit about LaserNet and the platform we have and the role it plays in any company's information ecosystem. So key takeaways is... It's a very interesting platform that has room in all enterprises. It's also very interesting financial characteristics with the scalable business model and the ARR that we have been building for quite some time and if anyone wants to to look at where we're going. It's looking at the ARR. We are aiming to continue this profitable growth journey going forward. Highlighting the divestment of public as well that we aim to close 1st of December. Also the continued margin improvement that we have done a very good job there and will continue to do so and now going forward very strong focus on on laser net and building from this very good foundation that we talked about today financially as well as technically and commercially with the business model that's where we will focus now And with this little summary, I want to say thank you to you who have listened in, of course, but also to our team in Sweden, Denmark, UK, US, France, Denmark, Germany, for a really good work this last quarter and to all our And colleagues in public, I also wish you the best of luck. It's been great working with you and you will have a great time with SDG. So thank you very much.

So, let's start with some questions, and we have quite a lot of questions from the audience actually. The first one is about the Capital Markets Day, which was planned for November, but that didn't happen apparently. So, I mean, why was that? And do you have any new date for us to announce?

Yes. So, we need to close the transaction first. And then we are a little bit limited in terms of our silent periods. So, and given that we now aim to have our Q4, 20th of February, and shortly thereafter, most likely beginning of March, we plan for the capital market stay.

So, that is sort of... And we will come back when we have the date. Great. And what can we expect from the capital market stay?

An extension of the ARR graph. Jokes aside, of course, talking about the payment we have received from public, what we will do with that. Also, our plan for future expansion. Where will we grow? How will we grow? And of course, we have touched on this. We are very good and established in the dynamics ecosystem. It's the fastest growing ERP system. So that is a very qualified guess that we will do more of the things we are good at. We will talk more about that. We will also talk a bit more about the longer perspective. There are areas, as I explained today, where our platform is useful for any corporation now. figuring out how you get in to any cooperation and where we have the blue oceans where our offering is competitive compared to, for example, open text and these large dragons. That will require some more time, but we will elaborate those kind of questions. And then, of course, financial targets for the coming, for the near and a little bit longer future, of course, as well.

I see something to look forward to. So also a question about generative AI. How do you see generative AI interacting with output management? Can AI fully replicate laser net templates and workflow precision in regulated markets such as banking? Why or why not?

So we see, that's a very good question, and we see generative AI as a very good complement to the LaserNet product. That is making the LaserNet product easier to use and to create these templates. So we see that it will make our software easier to consume in the organization where it lands.

Okay, so you think it's an opportunity rather than a threat?

We see it as an opportunity, absolutely.

And I mean, no new players so far like AI Native coming and taking some work to chair? You don't see any signs of that?

No, we don't see any signs of that yet. But of course, one should always be on the look for that, absolutely. And it's really amazing to see what... what these tools can do. But one must not forget also that the experience that is being built up over a long period of time. So I see a complement where a solid platform is being easier to consume with generative AI as a good offering that we have.

Okay, I see. So what's the income split between the different ERP systems like Temenos, Dynamics, Infor, etc.?

I think we said that in the sort of 60-40 to Dynamics. And then we have also other, a little bit in other ecosystems. But that is more, there we are opportunistic. We put our... primary focus on dynamics and then we also focus on 10 loss and still were opportunistic in the other area so very small levels there that's clear and so what has the conversion rate been like for the premium concept in laser net how many customers convert from the premium model to a payment model That is a very good question. I can't answer it properly, but I'm very curious. But what we hear, especially when we talk to our partners, is that it is a it is especially our partners that find it useful when they do an implementation then they say try this as well and they see it as a good good leverage to to a coming cell that is that is sort of what we what we see right now so sorry no data on that yet Perhaps at the capital market stage? Maybe, maybe. Good idea. We'll dig into the numbers.

What's the churn rate and net revenue retention in LaysNet? And I mean, you don't disclose any exact numbers, so I don't expect you to do that here either, but could you give some?

I think we will come back to that at the capital market stage.

Okay, I see. Great. The strategy of significant investment in other ERP ecosystems mentioned last webcast seems to be altered to a clear focus mainly on dynamics. Is that the right interpretation?

Yes, near term absolutely double down on dynamics and what we know. But of course, going forward, there are very interesting opportunities outside the dynamics as well. That must not be forgotten, but right now we, in the near term, 2026, 2027, double down on dynamics and the ecosystems where we sort of, we know how they work, we are well established, et cetera. Okay. And, of course, taking care of the very fine business we have in the terminals ecosystems as well, of course, naturally. But sort of doing what we know well, we start there.

Sounds reasonable.

And, again, also coming back to it, because we see, I mean, we spoke about sort of a year ago, we want to deal with through IFF, which is extremely interesting. And that client Munter really saw a need for us. So there is something there, but again, taking the investment to go all into that and penetrating that kind of ecosystem where again, we are parking that for a while, while focusing on where we have good competence and infrastructure.

Sounds reasonable. Another question here, will the other segment, and I mean that's basically the group common costs, be able to scale down given the divestment, and by how much do you reckon?

So that is of course a good question. So yes, we are of course, as always, when we talk about margin improvements, we're talking margin improvements in the nascent and former business area, as well as in the supporting functions. Absolutely. but we're not mentioning a number yet. But that is efforts that are being done as always. And, of course, it means supporting function as a whole. If we're catering to a business that's half the size compared to before, of course, there's room for improvements, definitely. But numbers we will not mention at this point.

I see.

And yes, also adding to that topic, we are now splitting the business into two pieces. And of course, we want to see that they work standalone. The joint entity was more complicated than Leifnet alone. And going forward a few quarters, of course, we will see more clearly where we can simplify things and thereby coming down in cost. So that's absolutely focused.

okay great and we also got a question about what you will do with the proceeds from the divestment I think you've answered that already we will get more info at the capital markets day right yes so what other initiatives do you have to expand your partner network what is the timeline and cost to onboard a new partner

I don't think we have any really solid data that's that detailed. But when it comes to continued expansion, yes, attracting more partners is important. being more active in the ecosystem towards the partners but also towards the end user investing in the go-to-market absolutely a priority the coming year. really making sure that we facilitate for our partners to do business. For example, the Essentials program is one piece of that. But then, as well, attracting more partners, also important. But again, we shall be much more present in the ecosystem and active in the ecosystem as we go forward.

Okay. We touched upon this before this presentation when we were talking that perhaps it's even more important to strengthen the partners you already have than finding new ones. I mean, can you elaborate on that perhaps?

Absolutely. We won, for example, Alistia, which is a large partner. and making sure that everyone in that organization knows about us, that we're in all of their deals, that we come in early to the deals, but also that we bring something to the table in terms of lease, etc. Nurturing that and deepening that cooperation is absolutely very important. And we have our large partner tabella that we have been working with for a long time. Deepening those type of corporations with joint marketing and joint activities is of course absolutely key and in line with our strategy to do more of the things we know that we do well.

I see. I mean, you mentioned 21% CAGR the last 10 years, but only 14% the last two years. Will the higher growth come back, or can you elaborate on the slowdown?

Yeah, no, but I think our journey going forward, I think looking at the past, Fewer years, you know, we've had a stable growth journey. And in the short term, I don't think we see large deviations from that growth journey. Then that will need to come with more investments. And we've had historical investments historically where we're saying now we want to grow with profitability. So I think... 20% growth is not probably the growth journey we are on.

Not, I mean, obviously not right now. But again, coming back to where we want to be, of course we want to do more. And again, Dynamics is the fastest growing ERP system in the world. Dynamics is growing in terms of how they chase low-end SAP, so they are going up in ticket size. That will have an impact on us. We are not, in that ecosystem, we are not working with all the customers in there. We are primarily targeting the F&O segment, for example. So there is a lot of things we can do within that ecosystem to grow our revenues with our scalable business model. And of course, that will be focused going forward.

I see and so you mentioned last I think we have touched upon this question actually but it's about other ERP systems Yeah, I think you touched upon it already. So let's move to the next question.

It is a big world out there with the different ERP systems. And there is a lot of legacy products that does similar things to ours. So there is a lot of... opportunities out there so that again I'm again emphasizing that there is a lot of opportunity and near term we do more of what we do what we do well now But there are very interesting things that we are looking into.

Yeah. Okay. What's your take on a share repurchasing program compared to a dividend program from the money obtained from the divestment? I mean, I guess it's a question for the board of directors, but do you have any comments on that?

No, not really. We'll come back to that one shortly.

Great. What's the customer acquisition costs in LaserNet?

And that's also something we'll come back to at the capital market stage.

Great. So with that I want to give you one last opportunity to ask questions. So you touched upon e-invoicing in your CEO letter and you see some orders coming from that. Could you elaborate a bit? Why is that increasing the demand for Laysanet?

So our business is driven by the fact that our ecosystem is growing. I touched on that. And then it is driven by value change being digitized. And then finally these standards increases the number of variants of documents and the number of documents you need to have. So that's why these standards are important to drive automation and variance of the documents flowing back and forth. So that is one of several drivers of our business. interesting to see that this is now starting from there. We're starting to see a movement there because people have been talking about this for quite some time. But now we start to see something there. So it's a little trend coming.

Interesting. And also, I mean, you come from a quite soft Q2. We saw a rebound in the ACV, and I mean, especially considering the short and also that Q3 tend to be a bit softer due to vacations and so on. I mean, could you elaborate a bit? What's driving the improvement, and what can we expect looking forward? I mean, is this momentum here to stay?

I would say so, because we have had We see good momentum and have seen good momentum in the dynamics business. And now we see the bank and finance business starting up. And we see that this, we see this level as realistic going forward. Then, of course, in our business model, we are dependent on partners. We are a part of the solution. We are not driving the solution. And that means that we are not totally in control of how a sales cycle is developing. And that was very clearly seen in Q1 and Q2 when our bank and finance business was soft.

I see. So we have one last question from the web. Do you have a five-year or longer-term plan in discussion? What is the margin target?

Good question. That's to the point, that question. So, of course, we have internally a five-year plan, but externally we'll share our targets and what they will be externally at the capital market.

I see. Sounds like we have a lot to look forward to.