Formpipe Software AB (publ) (FPIP) Q4 FY2025 Earnings Call Transcript & Summary

[Audio Gap] present the results, and then we will follow up with a Q&A session. And if you do have any questions, please put them in the chat, and we will address them accordingly. But with that said, please go ahead and present, Sophie.

Thank you, Simon. Thanks, everyone, for joining this call with Formpipe, where I present the Q4 numbers. So I'll dive straight in. So, the header for this call is a Strategic Shift for Continued Scalability. And it has been, of course, a very eventful Q4. And I will talk a little bit about all the things that have happened, but let's just start on the most important things, which is actually the numbers. And I think you recognize this slide from before. So diving in directly into the numbers. We had net sales of SEK 60 million and that is in relation to SEK 59 million that we had in Q4 '24. We had a net ACV of SEK 2 million compared to SEK 8 million in Q4 '24. And then finally, we had an EBIT of SEK 8 million compared to minus SEK 6 million in Q4 last year. And then talking a little bit about these high-level numbers. So from a net sales perspective, we are, of course, affected by FX. As you can imagine, being a very global company that Lasernet is, we have most of our revenues in other currencies than SEK. And given the increased stability of Swedish krona, that, of course, has a negative effect of our overall net sales. But given the industry that we're in and as Lasernet now being a stand-alone in our Formpipe environment, that also means that our recurring revenue is then very high at 91% of net revenue, which is, of course, a very nice number. And then also talking a little bit about the net ACV of SEK 2 million. This is, of course, not something we think is good. We want to have higher numbers. We were affected by churn in this quarter, both in terms of a legacy product in relation to eDOCS, it's called Email Filing, and then we also had a bank churning. So we hope to return to a more normalized level of the ACV because this is not where we want to be. And then finally, then the EBIT number. So without the one-offs then that are both related to the divestment of public of roughly SEK 25 million. And then also the remaining part, the SEK 18 million is related to the restructuring and mainly then personnel related. But it's good to see then that the work that we have done in terms of improving the margins have already had an effect in Q4, showing them in this stronger EBIT number. But then, I want to also then move over to talking about the highlights of Q4, because there has been a lot of things going on. So first of all, the divestment of public was finalized on December 1. And the Board has decided to propose a distribution of proceeds corresponding to SEK 14 per share, and that's a total of SEK 760 million. We will come back or the Board will come back as to how that will be distributed to the shareholders whether it will be through a dividend or whether it will be through a share redemption. And that will be announced in due course ahead of the Annual General Meeting. And then looking into the kind of normalized business and the net ACV, we did have a stable intake of new customers, primarily in the Dynamics ERP space with 18 new deals. And I will talk a little bit more about the new deals in the presentation to come. And then we had two new deals in the Banking and other ERP. But as I had mentioned, we did have churn from our legacy systems, which is affecting us. We do expect this to be the large -- the majority that we have already shown, so there's not that much left from an overall ACV perspective from this Email Filing. So we shouldn't have a larger effect going forward. And then lastly, but not least, we did announce a strategic reorganization also as part of that divestment of public. So, we have had restructuring in the Lasernet business, primarily in the U.K. So that together with the organization that we also announced in Q1 2025. We've had then two reorganizations and that is then driving the improvement that we're seeing on the EBIT line already in Q4. We also announced a leadership change. So Magnus is stepping down as CEO and me taking over as acting CEO starting January 1. But then,, I also want to put a highlight on what's to come. So we are still Formpipe, the legal entity being listed is Formpipe Software AB. We are rebranding ourselves into the Lasernet Group. So the rebranding will be announced mid-March, and then legally, we will have the name change approved by the Annual General Meeting in end of April. So more to come about the Lasernet rebranding. So talking a little bit more about the customer wins and also customer expansions. So, talking a little bit about the Temenos perspective, we have a customer called Close Brothers, which is a merchant bank in the U.K. We've had them as a customer since 2014. And they've really been through a journey with us, starting with on-prem and then now in Q4, transitioning over to be fully cloud. So, this goes to show that we are a trusted partner with our customers. We've been around for a very long time, and we grow with our customers. And now Close Brothers is one of our largest banking customers that we have from an ARR perspective. So that's really good to see that we have these trusted customers with us. And then talking a little bit about new customers. So, NDI, Nordisk Daek Import. This is a large tyre wholesaler in the Nordics. They are a new customer of ours since Q4. They have then implemented Dynamics, and then we were the solution in terms of customer communications. And it goes really well with our story about how we can assist customers with a complicated either supply chain or complicated setup when it comes to document management. And then finally, Unisys, which is then, of course, also a very large company there, again, we also had a Dynamics deal together with Unisys and they are a global accounting firm, and now they are implementing Lasernet together with their Dynamics installation across the U.S., U.K., Germany and Asia. But I know that for some of you, Formpipe is maybe not as known within the Lasernet business that we are in compared to the divestment we had with public. So, I just want to a little bit reiterate what it is that Lasernet does. So in a nutshell, what we do is that we solve universal document challenges, which sounds pretty straightforward, but it can be more complex than you might think. So we've been around for more than 30 years. And I think Close Brothers as a customer is a good example that we've had them for quite some time. We have over 2,500 customers together with 75 partners, helping our customers, both new and old, and we are at seven offices around the globe. So what we really can do is we can help your kind of universal document challenges. So it could be anything from creating accounting statements like invoices, purchase orders. It could be more complicated documents when it relates to shipping or other regulatory requirements. So with Lasernet our customers can really help to make sure that they get what they need. So we can deliver these documents to the end customer. It can be digital, it can be printing solutions. And most of our customers work in a very data and document rich environment. And that's where they really see the benefit of our products. And you can see for some of our customers listed down below. And then I'm moving over to my CFO hat and going through a little bit. And I know this is a busy slide, but I think it's good to also dive in into the detailed numbers. So I just want to reiterate again that now we are looking at the Lasernet Group. So all numbers have been restated just showing Lasernet Group, and that means the Lasernet former business area together with any other overhead costs that we have for running the group. So this is the complete picture for the Lasernet Group as we will be renamed to. So looking at the highlights, we had then a continued growth in SaaS with 13% and then a decline in support and maintenance with 13%. Then we have delivery. So delivery, I just want to reiterate again. So compared to our prior business, which was in the public domain, Lasernet does have delivery, but it's mainly done by subcontractors. So it is a part of our revenue, but if the revenue goes up or down, we typically have cost of goods sold or selling expenses, as is pointed out here, that corresponds to that. So it's not important from an overall profitability perspective. And I think that's a big difference compared to our former P&L when we had the public business included. So that means overall perspective, our net sales was up 2%. And if we adjust from FX, it was up 7% in the quarter. Then we have a huge improvement in our EBITDA line, so a margin improvement up to being 21%. So it really shows the work that we have done in the restructuring of our Lasernet business, getting to very healthy levels when it comes to EBITDA margin. And compared to Q4 last year, which was 0% from a comparative point of view. And then we've had one-off costs of SEK 43 million in the quarter. So that relates both to the divestment of public of roughly SEK 25 million and then the restructuring and the personnel reduction that we've done in the Lasernet business from the majority point of view of roughly SEK 18 million. And now we are leaving that behind us and starting 2026 in a more scalable environment. And that leaves an EBITDA adjusted for one-offs of minus SEK 35 million compared to minus SEK 6 million then the year before. And now this is a new slide, and it's just to highlight a little bit about the Lasernet journey that we are at as a company. So showing the 10-year trajectory for our recurring revenue, stemming back from 2016 then to 2025. In the dark purple, you can see our support and maintenance that we've had since 2016. And then it's quite clear to see as we are growing the company, we are moving towards SaaS and with a small decline in support and maintenance. And then also when it comes to profitability, it's quite clear that we have been growing as a company, and our EBITDA has been both going up and down. But with the reorganization that we've done and with the stable foundations we are now at, we see then that we have a very healthy EBITDA to continue to scale from going forward. And just to reiterate the recurring revenue then at the CAGR in the past 10 years of around 16%. And then I will go back to the more kind of normalized slides that you've seen before diving into the kind of more Lasernet recurring revenue for the past 2 years. So we are now at a recurring revenue of SEK 217 million. That is 89% of our net sales. It has been growing 9% year-over-year. And we now have then -- so the Lasernet Group as we are today, covers more than 130% of our fixed operating costs. So we have a very stable foundation to continue our growth journey onwards. And then ACV for the fourth quarter, we did have a negative effect of FX in the quarter of SEK 4 billion compared to a positive trend in the year before of plus SEK 6 million. So we are really hit by the very stable Swedish krona. That means we have a net ACV of plus SEK 2 million. And what I alluded to before, we were hit then by some more unusual and larger churn. We're hoping to get back to more normalized level, but we also see that Temenos has been weak in Q4, and we also had a weakness in Temenos during 2025. But then, Dynamics has then been delivering way stronger. And that means we have an outgoing ARR of SEK 218 million, sorry. And unfortunately, with the FX then that kind of eradicates the actual uptick that we have seen. So what should you take away from this presentation? So one thing then we have completed the divestment of public as per December 1, we have then also decided a proposal for distribution of proceeds of SEK 14 per share. In conjunction with this, we have done a restructuring in Lasernet, both in Q1 of 2025, but then also in Q4 of 2025, bringing us both a stronger commercial focus as part of lifting in a strong commercial focus into the leadership team with our sales leads for the respective Dynamics and Banking perspective and also VP Marketing. But now we also then have a strong EBITDA with the possibility to keep on scaling going forward. And that was my third point. But then I also want to talk about or mentioning that in mid-March, we will be launching the Lasernet brand in a more phased level. So more to come about that going forward. And hopefully, I will be able to present our new brand identity in the Q1 release. And with that, I guess it's time for some Q&A.

Yes. Thank you so much for that presentation, Sophie. Let's continue with a couple of questions from my end initially. But if you do have any questions, please put them in a chat, and we will, again, address them accordingly. And we have gotten some questions. But starting off on the restructuring program here. Can you talk a little bit about what has happened more recently and also about the timing from these effects, these layoffs?

Yes. So as I mentioned, we had two restructurings completed in the Lasernet organization. One was in Q1 of 2025 and there, of course, those effects have long been put into the P&L. And then the most recent one that we announced in -- well, as part of the divestment 1st of December in 2025. So that was largely related to the Lasernet area within the U.K. And with that completed, I think we are -- we've seen some of those effects already now in Q4 in terms of lower personnel costs, and that means we are more fit-for-purpose going forward starting 2026.

Very good. And a question we have gotten in connection to that is what is the estimated cost savings from the reorganization in 2026. Is there anything you can mention on this?

I don't want to talk too broadly about the kind of cost savings. But if you look at it from a kind of overall perspective, if you compare the Q4 2024 to Q4 2025, we had a reduction of personnel cost of around 25%. So I think that sort of states a little bit. We're thinking that we're going to be in terms of a more normalized view. So yes, between 25% reduction to what we've had historically. But then, of course, I just also want to mention the fact that we have done these restructurings is also to be able to invest in building the company forward. So we want to invest in go-to-market. We want to continue to invest in our product. So it will not just be from a cost saving perspective, it's, of course, building the foundation to be able to grow. And there, we need to invest in primarily go-to-market and product.

And another Q4 specific question is around churn because you did mention some churn. Could you elaborate on what it's related to and is there a risk of more churn relating to these specific areas going forward? Or what's the view we should have here?

Yes, absolutely. So one of the largest parts of the churn relates to a product we have called Email Filing. It's a legacy product connected to eDOCS, which used to be owned by OpenText, now has been sold to NetDocuments. It's not a large part of our total kind of ARR. I think the churn that we've seen, which was around SEK 600,000, SEK 700,000 in the quarter, we don't have a lot of ARR left in Email Filing, and we also think that the churn that we've seen is the majority of what we're seeing now and the remaining customers will probably stay. But I think we have around SEK 45 million left. So it's not a risk for us when it comes to total ARR. And then we had a churn in one of our Banking customers that never implemented our product when they installed the Temenos product. And now 3 years down the line, they decided they don't want to start implementing it, and that's why it churned, which happens, which is quite rare, but it happens.

Thank you. And a question that we have also gotten that is connected to this is that there is currently a lot of talk about seat compression as a result of wider AI implementation. Does Lasernet have exposure to this, i.e., Lasernet subscription revenue, depending on the number of customer employees?

Not really. I think talking about AI as a threat from a larger perspective is, of course, something to be mindful of. I think we see AI more as a tool that we can use that could help us in terms of keeping a par with development and maintenance cost in our software. But of course, as always, you need to be mindful about what's going on and everything is happening fast, right? And it's quite clear that the software industry has taken a hit with AI threat as a whole. So it shouldn't be diminished, but we don't see it as a direct threat for our business at the moment, no. We more see it as a tool that we could use in our own work.

Perfect. And before we jump in a little bit more into the business momentum, one big event happening here in Q3 is, of course, around the dividends and the anticipated dividends of roughly SEK 760 million. Can you talk a bit about the capital policy that you see going forward? Also, you have previously spoken a little bit about potential for M&A. Should we view this move as that you are prioritizing perhaps organic growth to a larger extent than M&A historically?

Yes. I mean, of course, we talked a little bit -- what should we use the proceeds for, like should we retain part of it and look more actively to M&A. I think where our share price is today, unfortunately, we -- it's too much discounted when it comes to our share price that we feel that the right thing to do for our shareholders is to pay out these proceeds. Because having them kept in our company unfortunately, doesn't bring the value to our shareholders that it should. And that's the way the software market is at the moment. So that's why we did decide to pay out then the SEK 760 million. And then we are, of course, evaluating by how we will do this, whether it will be through a dividend or a share redemption. And the Board will come back to that more specifically before the Annual General meeting invite, if you will. But that doesn't mean that we have room -- I mean, of course, we still have room to do smaller M&As if we would want to. But I think we see more in 2026 being more organic growth rather than doing something material in terms of M&A.

That's clear. Very good. Another question on the cost savings, is that -- is the Q4 cost base fully reflecting the announced head count reduction?

Yes, it is.

Good. And how large is the churn relating to the Banking and E-mailing Filing? You talked a little bit about this. Is there anything more to add on it?

I mean, there are always smaller parts, right? But these are the two main components in the overall churn number.

And when do you expect the changes within the Lasernet organization to have positive impact on ARR growth? Could it be already in late 2026?

I mean, we are a very partner-led company, right? So we rely heavily on our partners. We have trusted partners, both within the dynamic space and also with the Temenos. I think it's clear that we've seen weak performance in the Temenos space. We are, of course -- we have a pipeline, it looks promising. But on the other hand, it has been weak for the past year. So I think it's quite clear that in the Dynamic space, we have a broader set of partners where the deal sizes are smaller, but it's also more widespread. So there, I think from an ACV perspective, I see that's going to continue building a positive momentum. And for the Temenos side, of course, we're working hard as much as we can, being partner-led. But we'll see, right? I think we are, of course, hoping that Temenos will come back to the levels we've seen the past 2, 3 years. That is, of course, our goal. Did I answer your question? I hope so.

I think so.

Yes. Okay.

And what are your plans regarding recruitment in 2026? You have, of course, spoken a little bit earlier now about the investments and the cost base into 2026. But could you talk about the recruitment specifically?

Yes. I mean, we actually do have some open recruitments ongoing in terms of -- from the development product perspective, but also from a product marketing perspective. So there are a couple of open positions out there if people want to apply. And that's where we see the focus, right? So it is related to the kind of two main categories: go-to-market and product. Those are the two main components where we want to invest.

Makes sense from my point of view. Another question on the ARR. Is it -- how much of it still remains from legacy products, i.e., what is the remaining potential churn from those products? And could it be of interest to report them separately in the ACV ARR table?

I guess we could. I would say they're very small now. So I don't see it as a risk from the overall kind of ACV ARR perspective. But that's something we can come back to. But from my perspective, it's so much smaller now that I don't see that as a huge risk. But then, of course, with the Email Filing, we do have these potential churns every now and then. The other kind of main -- I wouldn't call it legacy product, but maybe a product that isn't part of our core is Xdocs, which is more in the life cycle QMS point of view, which is maybe not core for where we're going, but it is a nice business, and it's still growing somewhat. So we'll see what we'll do there.

And another question on the non-recurring items or one-offs. Are all those taken? Or could we expect to see more in the coming quarters?

I mean, you can never sign in blood on anything. But I would expect that we have completed all things that we have wanted to complete. So from the public point of view, that's all divested and gone. Those costs have been taken. In terms of restructuring, we feel quite confident that we've taken now the steps needed. So I wouldn't expect any more non-recurring to expect in 2026. No.

That's clear. And the recurring topic. I see that we have multiple questions on that. It's around AI. Of course, that has been intensified discussion in the market more recently. So could you describe your view on the recent AI discussions happening and traffic among SaaS companies lately? I mean what are you seeing here? What's your sort of moat that you would like to highlight?

I mean, I would say -- I mean, it's clear, right? Most software companies have been hit in terms of share price by this AI uncertainty, where we're coming from and in the terms of business where we add solutions to our customers, we don't see AI as a threat. I do -- as I said before, I do see AI as an opportunity or as a tool that we can use to make sure that we keep our costs at bay. But I'm no AI expert. But that's kind of where we're coming from, that I have a hard time thinking that AI in the short term would replace the complexity that software, such as ours and ERP systems are solving. I wouldn't trust AI with my reporting. That's how it is.

Yes. And also the productivity enhancement.

Exactly. Of course, yes.

Something to mention. Okay. Another announcement that happened after the quarter was that you have once again been recognized as a trusted partner with Temenos.

Yes.

But you have also expanded the scope of platforms with IFS.

Yes.

What does these announcements essentially entail? Does it require lots of cost? When can we expect revenues? Can you give us some more color on these type of announcements?

I mean, of course, it's always good to be recognized by Temenos, right? It's one of our most important partners and where we've also seen weaker revenue in the past year. So we are, of course, hoping that Temenos will come back and that we will see more ACV coming from the Temenos space, but it's always good to be recognized by Temenos. From an IFRS perspective, it's a new partner program. From a cost perspective, it's not that costly. I think from a revenue or a potential ACV perspective, it's way too soon to say, right? So we did get a new customer, I think, was a year, 1.5 years ago in Munters, a company that found us, and they are an IFS customer. So it's quite likely that there are possibilities within the IFS space, where we would fit very well with the IFS offering. But we also want to explore that avenue and then see how we can grow from there. But it's, of course, something maybe not seeing large growth in 2026, but hopefully then maybe in 2027. But too early to say. Early days.

Yes. I think that makes sense. There is another question on the share redemption. Why complicate the payout with the share redemption instead of a dividend, what would be the upside for the shareholders? And it seems a bit more complicated, i.e., connected with administrative costs.

It is more administrative, yes. It relates more to shareholders specifically, if you are a person and you own shares directly. There is quite a large difference from a tax perspective, whether you get a dividend or where you do a share redemption. And we, of course, need to factor in our complete shareholder base and make sure we do what's best for the majority of our shareholders, and that's why we are exploring both these options to make sure how can we make available the funds that we are proposing to our shareholders in the best possible way. So that's what we are exploring.

Good. And just to clarify, Q4, 15% personnel cost reduction happened on 1st December. So should we expect lower personnel costs in Q1 versus Q4?

Somewhat. Yes, yes. We did also see effect already in Q4, but there should be some more cost reductions. But then we are, of course, also hiring. So -- but from an overall perspective, I would expect a little bit more cost savings, yes.

Good. And would you also mind giving us an updated view on the CMD from my point of view, I think it makes sense that you are an acting CEO currently. Is that how we should view it so that you need to establish that position first?

Yes. I think originally, we said we would have a CMD sometime in Q1. Now with me being acting and I think it's quite clear that we need to wait for our new permanent CEO to drive the CMD. So, when we have our new CEO in place, then we will, of course, come back with the date for the CMD.

Great.

And I hope you all will tune in for that.

Yes. Sure. I'm going to do that. And I hope everyone else does as well. If you do have any questions, I'd like to send out a reminder, please put them in net chats. Otherwise, you think that we could sort of wrap this up with you just giving us a reminder of some of the key takeaways again. So we have that refreshed in the future, talking about a little bit on the sales pipeline and then about the cost base.

No, absolutely. I mean, just to summarize, I think we've had a very eventful 2025 and especially the Q4 of 2025. When you look at it from a kind of organic point of view, we are a bit disappointed with the ACV number. We're hoping to improve that. We are, however, happy about the restructuring and the improvements we're seeing in the cost base, making it possible for us to continue to scale. And with the restructuring and the reorganization we've done, we feel we have emphasized the commercial focus within our organization. And that's what we hope will then, of course, help drive future ASV together with our partners.

Very good. Thank you so much for attending here. If you do have any follow-up questions, I'm sure you will find the details at Formpipe's Investor Relationship website. Otherwise, you could also reach out to me, and I will help you. And with that said, we'll end the session. Thank you so much for attending here, Sophie.

Thank you, Simon. Thanks, everyone.