Esker 1

Better profitability in FY22

Esker 20 September 2022 Update
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Esker

Better profitability in FY22

H122 results

Software and comp services

20 September 2022

Price

€125.6

Market cap

€733m

$1.00/€1

Net cash (€m) at end H122

27.7

Shares in issue

5.8m

Free float

78%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(13.7)

6.6

(58.6)

Rel (local)

(7.5)

4.0

(54.4)

52-week high/low

€361.50

€112.10

Business description

Esker provides end-to-end SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In FY21, the business generated 55% of revenues from Europe, 39% from the United States and the remainder from Asia and Australia.

Next events

Q3 revenue update

18 October

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Esker is a research client of Edison Investment Research Limited

Esker reported a robust H122 performance, with 19% revenue growth year-on-year, 41% operating profit growth and 19% growth in the annual recurring value of new contracts signed. Reflecting the potential for slowing demand due to current macroeconomic uncertainty, the company slightly reduced its revenue guidance for FY22 but expects to be at the upper end of its operating margin target range. We reduce our cost forecasts for FY22/23 and revenue forecast by 1% in FY23, driving a 16% EPS upgrade in FY22 and a 9% downgrade in FY23.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

112.3

14.5

1.99

0.50

63.2

0.4

12/21

133.6

18.0

2.36

0.60

53.2

0.5

12/22e

158.0

25.4

3.20

0.65

39.3

0.5

12/23e

180.9

25.0

3.10

0.70

40.5

0.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Operating margin strength in H122

In H122, Esker reported revenue growth of 19% (13% in constant currency), EBITDA growth of 33% and operating profit growth of 41%, equating to a 16.9% operating margin (H121: 14.2%). Excluding a €2.2m accrual reversal, the margin was 14.0%, still well within the company’s 12–15% guidance range. After paying €9m in cash for Market Dojo in Q222, Esker closed H122 with net cash of €27.7m.

Outlook: Sounding a note of caution

Esker lowered its FY22 revenue guidance slightly on a constant currency organic basis (from 15–16% to 12–14%) to reflect increasing macro-economic uncertainty, although on a reported basis it will be much higher due to the strength of the US dollar. After the strong operating margin reported in H1, the company has narrowed its operating margin range (13–15%) and we expect it to hit the top end of the range. While our FY22 revenue forecast is unchanged, we slightly reduce our FY23 forecast by 1%. Reduced cost assumptions in both years result in a normalised EPS upgrade of 16% in FY22 and a reduction of 9% in FY23. We note that the high level of recurring revenue (c 80% in H122) and recent strong order intake provide a good level of support to the business, even if volume-related revenues and future new business start to be affected by weaker end-user demand.

Valuation: Recurring revenue supports premium

The share price appears to have stabilised after declining from its December 2021 peak of €361.5. Based on FY22 and FY23 P/E ratios, the stock continues to trade at a premium to French software peers and at a discount to US SaaS peers, we believe due to its high level of recurring revenue, history of and potential for double-digit profitable growth and strong balance sheet. The company highlighted that it is well-funded to take advantage of opportunities to make bolt-on acquisitions.

Review of H122 results

Exhibit 1: Summary of H122 results

€m

H122

H121

Y-o-y

Revenues

76.3

64.4

18.5%

EBITDA

18.0

13.6

32.7%

EBITDA margin

23.6%

21.1%

2.5%

Reported operating profit

12.9

9.1

41.0%

Operating margin

16.9%

14.2%

2.7%

Reported net income after minority interest

10.2

7.6

35.0%

Basic EPS (€)

1.75

1.31

33.6%

Diluted EPS (€)

1.72

1.30

32.3%

Net cash

27.7

33.6

-17.5%

Source: Esker

For H122, Esker reported revenue growth of 19% y-o-y (13% constant currency). EBITDA was 33% higher year-on-year and operating profit 41% higher benefiting from two factors:

Reversal of personnel tax accrual: FY21 operating profit was depressed by an accrual made for tax payable relating to share-based payments (Esker’s share price increased from €178.0 to €361.5 over 2021). In H122, with the share price declining to €127.3 at the end of June, €2.2m of the accrual was reversed.

Currency translation: with c 40% of revenues from North America but a lower proportion of costs in that region (most R&D is based in France), the company saw a €1.1m benefit to operating profit in H123 versus H122. Of this, €0.9m was due to US$/€ translation (H122 US$/€ 1.085 vs H121 1.202).

This resulted in a reported operating margin of 16.9% for H122, well ahead of the target 12–15% range. Adjusting out the tax accrual results in a margin of 14.0% and further adjusting for the currency impact results in a margin of 12.6%, within the target range. The chart below shows the progression of operating margins on a reported and adjusted basis, adjusting for the tax accrual in H221 and H122. This shows that excluding the accrual and reversal, operating margins were around the 14% level.

Exhibit 2: Reported versus adjusted operating margin, H120–H122

Source: Esker

The company continued to increase headcount during H123, with average headcount of 884 up 12% y-o-y and period end headcount of 922 (end FY21: 840). This includes the addition of Market Dojo, which was consolidated from 1 June (see Positive outlook for further detail). The company expects to continue hiring in H2 but most likely at a slower pace than in H1.

The joint venture (JV) with Quadient provided a contribution of €0.8m, up from €0.6m a year ago. Esker also received its first dividend from the JV, totalling €1.8m. The company reported an exceptional charge of €0.5m relating to the revaluation of treasury shares.

The company closed H122 with net cash of €27.7m (€39.9m cash plus €4.8m included in financial assets offset by €17m in new loans), after paying €8.8m in cash to acquire 50.1% of Market Dojo. The remaining €1.3m of the consideration was funded via equity (we estimate c 9k shares).

SaaS revenue continued its strong growth trajectory

The table below shows the split of revenue by type.

Exhibit 3: Revenue by type

€m

H122

H121

y-o-y

y-o-y constant currency

SaaS

60.8

49.5

23%

17%

Implementation services

12.1

11.0

10%

9%

Legacy products

3.3

3.9

-15%

-26%

Total revenue

76.2

64.4

19%

13%

Source: Esker

SaaS revenue, which includes a fixed monthly subscription and variable per document fees, was 23% higher year-on-year and 17% higher in constant currency (cc). The company noted that subscription-based revenue made up 55% of SaaS revenue (up 33% y-o-y) and variable revenue made up 45% (up 9% y-o-y). Management noted that the slower rate of variable revenue growth could signal that customers are starting to see pressure on their businesses in the current tough economic environment. Implementation services revenue was 10% higher y-o-y (9% cc). On a reported basis, this splits out as growth of 6% in Q122 and 16% in Q222, reflecting the lower availability of Esker and customer staff to implement projects in Q1 due to the Omicron variant. As expected, legacy product continues to decline.

Robust order intake

In its Q222 revenue trading update, the company reported bookings with a lifetime contract value of €14.6m (+41% y-o-y cc) and we estimate that bookings for H122 were c 30% higher year-on-year on a reported basis. The annual recurring value (ARR) of Q222 contracts was €4.2m (more than 25% higher y-o-y, 17% cc), equating to an average contract length of 3.5 years. For H122, ARR of bookings increased 8% in constant currency. As a reminder, the ARR only includes the subscription fee element of the contract and does not include the volume-related element.

H1 bookings were 16% higher year-on-year in Europe, 62% higher in the Asia-Pacific region (APAC) and 4% lower in the Americas. APAC’s rebound was mainly due to Australia and New Zealand; other Asian countries continue to be intermittently affected by zero-COVID-19 policies. The Americas saw very strong order intake in H121, creating a tough comparison; the company expects this region to grow in H222, particularly Q4.

Further bolt-on M&A possible

During H1, the company took out €17m in fixed rate loans of four- to five-year duration, with an average rate of less than 0.5%. This was partly to fund the initial payment for Market Dojo but also to ensure available funds for further M&A. Esker typically looks to acquire smaller businesses that have technology to fill gaps in the company’s product suite; these have attracted very high valuation multiples in recent years. Areas of interest include contract management, inventory management, EDI and payments. With the recent equity market declines, valuation multiples in the private market are also falling, potentially providing good buying opportunities for Esker.

Outlook and changes to forecasts

Raising a note of caution, the company has reduced its full year revenue guidance on a constant currency organic basis from 15–16% growth to 12–14%. Our FY22 forecasts were already conservative so we make no changes to our FY22 revenue forecast. We reduce our FY23 forecast by 1%, bringing reported revenue growth down from 15.8% to 14.5%. The company narrowed its operating margin guidance slightly from 12–15% to 13–15%, stating that it expects FY22 to be at the higher end of this range. We have reduced our staff cost forecasts, as based on H122 reported costs we were well ahead even taking into account the reversal of the tax accrual. Overall, we have reduced our cost forecasts (before depreciation and amortisation) by €4.4m in FY22 and €1.5m in FY23. We have increased our tax rate assumption from 22% to 24% based on the rate achieved in H122. For FY22, these changes drive a 2.6pp increase in FY22 reported operating margin and 15.7% increase in diluted normalised EPS. In FY23, the revenue decline outweighs the lower cost base, with reported operating margin declining 0.7pp to 12.9% and our diluted normalised EPS forecast declining by 8.6%.

Exhibit 4: Changes to forecasts

€m

FY22e old

FY22e new

change

y-o-y

FY23e old

FY23e new

change

y-o-y

Revenues

158.0

158.0

0.0%

18.3%

183.0

180.9

(1.1%)

14.5%

EBITDA

29.7

34.1

14.9%

32.8%

35.7

35.1

(1.7%)

2.9%

EBITDA margin

18.8%

21.6%

2.8%

2.4%

19.5%

19.4%

(0.1%)

(2.2%)

Normalised EBIT

20.1

24.0

19.7%

43.0%

25.3

23.6

(6.5%)

(1.7%)

Normalised EBIT margin

12.7%

15.2%

2.5%

2.6%

13.8%

13.1%

(0.8%)

(2.2%)

Reported EBIT

19.7

23.8

21.0%

43.7%

24.9

23.4

(6.0%)

(1.7%)

Reported EBIT margin

12.4%

15.0%

2.6%

2.7%

13.6%

12.9%

(0.7%)

(2.1%)

Normalised PBT

21.4

25.4

18.7%

40.9%

26.7

25.0

(6.1%)

(1.3%)

Normalised net income

16.7

19.3

15.7%

36.5%

20.8

19.0

(8.6%)

(1.3%)

Reported net income

16.3

18.7

14.5%

31.3%

20.5

18.8

(8.1%)

0.7%

Normalised dil. EPS (€)

2.76

3.20

15.7%

35.4%

3.39

3.10

(8.6%)

(2.9%)

Reported basic EPS (€)

2.80

3.21

14.5%

31.6%

3.45

3.17

(8.1%)

(1.0%)

Reported diluted EPS (€)

2.71

3.10

14.5%

30.3%

3.34

3.07

(8.1%)

(1.0%)

Net cash

34.1

37.3

9.2%

(3.5%)

44.0

45.5

3.3%

22.1%

DPS (€)

0.65

0.65

0.0%

8.3%

0.70

0.70

0.0%

7.7%

Source: Edison Investment Research

Valuation

We compare Esker’s valuation to a group of listed global document processing automation (DPA) software companies and to French-listed small-cap software companies (Exhibit 5). We have also included aggregate data for a group of US SaaS software companies (some of the companies in the first group are also in this group).

US SaaS companies on average are growing faster than Esker, although they are generating operating margins below the level of Esker. The typical growth path for US SaaS companies involves investing heavily in sales and marketing to gain market share as fast as possible, with little focus on achieving profitability in the short term. Esker’s model sits somewhere between low-growth, high-profitability on-premise software businesses and US SaaS companies’ high-growth operating model, aiming for a happy medium of double-digit revenue growth while achieving mid-teen operating margins.

We believe that Esker deserves a premium rating compared to its non-SaaS peers as its c 80% level of recurring revenue provides good visibility, it has the potential for multi-year profitable double-digit growth and it has a strong balance sheet that does not require additional funding to support growth.

Exhibit 5: Peer financial and valuation metrics

Company

Share price

Market cap

Revenue growth

Normalised EBIT margin

EBITDA margin

EV/sales (x)

P/E (x)

m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

Esker

€125.6

€733

18.3%

14.5%

15.2%

13.1%

21.6%

19.4%

4.4

3.8

39.3

40.5

Software companies with DPA software offerings

Basware*

€39.60

€572

4.9%

9.8%

5.3%

8.8%

15.7%

18.1%

3.9

3.6

264.0

66.0

Bill.com*

$163.12

$17,102

51.0%

33.5%

3.0%

5.4%

5.6%

7.7%

16.7

12.5

496.6

265.5

Billtrust*

$6.81

$1,117

54.8%

22.3%

-41.9%

-19.2%

-8.8%

-1.5%

5.8

4.7

N/A

N/A

Coupa*

$69.95

$5,311

16.0%

18.5%

7.8%

8.7%

14.1%

18.1%

7.9

6.7

162.0

105.9

OpenText

$39.12

$10,555

1.2%

3.8%

33.8%

34.2%

36.7%

37.2%

3.0

2.9

12.1

11.4

Pagero*

SEK12.74

SEK1,965

34.5%

25.6%

-32.5%

-17.3%

-7.2%

2.5%

3.0

2.4

N/A

N/A

Average

27.1%

18.9%

-4.1%

3.4%

9.3%

13.7%

6.7

5.5

233.7

112.2

Median

25.2%

20.4%

4.2%

7.0%

9.9%

12.9%

4.8

4.1

213.0

86.0

French small-cap software companies

Axway Software**

€20.50

€443

3.4%

3.5%

10.6%

12.1%

13.1%

14.4%

1.8

1.7

25.3

20.3

Claranova

€3.22

€148

2.1%

12.3%

5.8%

7.3%

7.1%

8.6%

0.3

0.3

10.0

5.9

ESI Group

€70.20

€425

4.3%

6.1%

10.1%

13.9%

18.3%

22.1%

3.1

2.9

36.8

25.3

Lectra

€31.00

€1,162

89.3%

6.8%

14.4%

15.9%

18.8%

19.9%

2.3

2.2

21.0

17.8

Linedata Service**

€40.70

€259

2.6%

2.4%

18.8%

17.6%

29.1%

27.9%

2.0

1.9

10.9

13.8

Sidetrade*

€126.50

€182

13.5%

20.1%

6.5%

10.8%

9.5%

13.7%

4.8

4.0

74.9

42.4

Average

19.2%

8.6%

11.0%

12.9%

16.0%

17.8%

2.4

2.2

29.8

20.9

Median

3.9%

6.5%

10.4%

13.0%

15.7%

17.2%

2.1

2.0

23.1

19.0

US SaaS software companies

Average

22.0%

18.3%

5.2%

8.2%

10.2%

12.9%

6.7

5.5

84.6

89.9

Median

19.7%

18.4%

4.0%

5.9%

9.3%

11.8%

5.6

4.6

22.8

36.8

Source: Edison Investment Research, Refinitiv (as at 15 September) *SaaS business model **Hybrid model


Exhibit 6: Financial summary

€'000s

2017

2018

2019

2020

2021

2022e

2023e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

76,064

86,871

104,188

112,274

133,580

158,042

180,923

EBITDA

 

 

16,399

18,279

20,054

21,927

25,653

34,075

35,062

Operating Profit (before amort and except)

 

 

10,547

11,955

12,843

14,037

16,804

24,038

23,625

Amortisation of acquired intangibles

(300)

(344)

(425)

(425)

(263)

(263)

(263)

Exceptionals and other income

(456)

(88)

(62)

0

0

0

0

Other income

0

0

0

0

0

0

0

Operating Profit

9,791

11,523

12,356

13,612

16,541

23,775

23,362

Net Interest

(110)

(57)

268

(67)

202

136

115

Profit Before Tax (norm)

 

 

10,669

12,215

13,634

14,462

18,008

25,374

25,040

Profit Before Tax (FRS 3)

 

 

9,913

11,783

13,147

14,528

18,148

24,611

24,777

Tax

(3,148)

(2,940)

(3,402)

(2,966)

(3,907)

(5,907)

(5,946)

Profit After Tax (norm)

7,281

9,168

10,106

11,509

14,131

19,284

19,030

Profit After Tax (FRS 3)

6,765

8,843

9,745

11,562

14,241

18,704

18,830

Ave. Number of Shares Outstanding (m)

5.3

5.4

5.4

5.7

5.8

5.8

5.9

EPS - normalised (c)

 

 

138

170

186

203

242

331

321

EPS - normalised fully diluted (c)

 

 

132

165

179

199

236

320

310

EPS - (GAAP) (c)

 

 

128

164

180

204

244

321

317

Dividend per share (c)

32

41

33

50

60

65

70

Gross margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

21.6

21.0

19.2

19.5

19.2

21.6

19.4

Operating Margin (before GW and except) (%)

13.9

13.8

12.3

12.5

12.6

15.2

13.1

BALANCE SHEET

Fixed Assets

 

 

37,912

39,635

47,201

48,987

57,229

69,589

73,289

Intangible Assets

26,673

28,096

29,323

30,787

33,644

46,704

49,204

Tangible Assets

7,115

7,050

10,434

10,036

9,896

9,796

9,696

Other

4,124

4,489

7,444

8,164

13,689

13,089

14,389

Current Assets

 

 

42,823

49,016

52,022

72,918

71,534

94,640

109,252

Stocks

176

147

185

257

341

341

341

Debtors

21,253

25,551

30,015

31,440

35,548

44,165

50,559

Cash

20,632

22,794

21,357

40,421

34,978

49,467

57,685

Other

762

524

465

800

667

667

667

Current Liabilities

 

 

(26,206)

(30,072)

(34,300)

(50,150)

(45,872)

(48,440)

(51,936)

Creditors

(26,206)

(30,072)

(34,300)

(38,650)

(44,703)

(48,440)

(51,936)

Short term borrowings

0

0

0

(11,500)

(1,169)

0

0

Long Term Liabilities

 

 

(14,909)

(10,810)

(8,276)

(6,342)

(2,497)

(19,497)

(19,497)

Long term borrowings

(13,716)

(9,318)

(6,516)

(3,644)

0

(17,000)

(17,000)

Other long term liabilities

(1,193)

(1,492)

(1,760)

(2,698)

(2,497)

(2,497)

(2,497)

Net Assets

 

 

39,620

47,769

56,647

65,413

80,394

96,292

111,108

CASH FLOW

Operating Cash Flow

 

 

17,311

18,366

20,290

24,389

28,844

29,195

32,163

Net Interest

(75)

63

352

(30)

253

136

115

Tax

(2,053)

(2,795)

(3,329)

(884)

(3,420)

(5,907)

(5,946)

Capex

(9,304)

(7,789)

(10,995)

(10,167)

(11,140)

(13,200)

(14,100)

Acquisitions/disposals

(7,551)

(225)

(486)

(492)

(5,491)

(10,077)

0

Financing

(345)

785

1,449

48

2,769

2,069

0

Dividends

(1,633)

(1,756)

(2,237)

(1,896)

(2,897)

(3,558)

(4,014)

Net Cash Flow

(3,650)

6,649

5,044

10,968

8,918

(1,342)

8,218

Opening net debt/(cash)

 

 

(13,681)

(10,016)

(16,576)

(21,018)

(30,285)

(38,609)

(37,267)

HP finance leases initiated

0

0

0

0

0

0

0

Other

(15)

(90)

(602)

(1,701)

(594)

0

0

Closing net debt/(cash)

 

 

(10,016)

(16,576)

(21,018)

(30,285)

(38,609)

(37,267)

(45,485)

Source: Esker, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Esker and prepared and issued by Edison, in consideration of a fee payable by Esker. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Esker and prepared and issued by Edison, in consideration of a fee payable by Esker. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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