Investing for sustained growth

Esker 10 April 2018 Update
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Esker

Investing for sustained growth

FY17 results

Software & comp services

10 April 2018

Price

€52.30

Market cap

€278m

$1.23:€1

Net cash (€m) at end FY17

10.0

Shares in issue

5.3m

Free float

81%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.8)

(1.9)

12.3

Rel (local)

(0.3)

2.8

8.5

52-week high/low

€55.6

€43.1

Business description

Esker provides end-to-end document automation solutions, offering on-demand and on-premise delivery models. The business generates c 55% of revenues from Europe, c 40% from the US and the remainder from Asia and Australia.

Next events

Q118 revenues

17 April 2018

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Bridie Barrett

+44 (0)20 3077 5700

Esker is a research client of Edison Investment Research Limited

Esker’s FY17 results confirmed that the company has maintained its double-digit revenue growth rate. While investment in R&D and consulting capacity held back the rate of profit growth in FY17, this highlights the company’s focus on driving multi-year revenue growth. We have revised our forecasts to take account of the higher cost base, which is more than offset by the reduction in the group tax rate. We increase our normalised EPS forecast by 0.6% in FY18 and forecast EPS growth of 19.5% in FY19.

Year end

Revenue (€m)

PBT*
(€m)

Dil. EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

66.0

9.9

1.22

0.30

42.8

0.6

12/17

76.1

10.7

1.29

0.33

40.5

0.6

12/18e

83.9

12.5

1.55

0.36

33.7

0.7

12/19e

92.0

15.2

1.85

0.39

28.2

0.7

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

FY17 – revenue growth funds investment

Esker reported FY17 revenue growth of 15.3% (11% constant currency organic), with normalised operating profit growth of 6.2% (margin 13.9%). Investment in headcount was ahead of our forecast, with consulting seeing the largest increase due to the demands of new customers requiring implementation services. e-integration performed well in the year, generating 9% revenue growth and an 18% operating margin.

Outlook – double digit growth; build partner network

Based on strong order intake in FY17 and high levels of recurring revenues (77% in FY17), management expects to be able to generate double-digit organic revenue growth in FY18. We expect costs to grow at a slower rate than revenues in FY18/19, resulting in operating margin expansion from 13.9% in FY17 to 14.5% in FY18 and 16.1% in FY19. In order to be able to support the implementation requirements of new customers, the company is working on building out a partner network; this could ultimately become a reseller network. While the company has a strong net cash position, it has de-emphasised its search for acquisition targets due to its perception that interesting early stage SaaS companies are currently overvalued. This shifts the focus back to in-house product development.

Valuation: Premium deserved

Esker trades at a premium to other DPA software providers and small cap French software suppliers, although we highlight it is showing stronger revenue growth and profitability than both groups, and has a high level of recurring revenues. Compared to US SaaS companies, which have faster growth but lower profitability, Esker is trading at a discount. Continued evidence of strong organic growth combined with margin expansion would be the key triggers for upside from this point.

Review of FY17 results

Exhibit 1: FY17 results highlights

€m

FY16a

FY17e

FY17a

difference

y-o-y

Revenues

66.0

75.4

76.1

0.9%

15.3%

EBITDA

14.9

17.1

16.4

-4.2%

10.3%

EBITDA margin

22.5%

22.7%

21.6%

-1.1%

-1.0%

Normalised EBIT

9.9

12.0

10.5

-12.2%

6.2%

Normalised EBIT margin

15.1%

15.9%

13.9%

-2.1%

-1.2%

Reported EBIT

9.3

11.7

9.8

-16.4%

5.7%

Reported EBIT margin

14.0%

15.5%

12.9%

-2.7%

-1.2%

Normalised PBT

9.9

12.2

10.7

-12.8%

7.3%

Normalised net income

6.8

8.2

7.3

-11.2%

7.3%

Normalised dil. EPS (€)

1.22

1.45

1.29

-11.2%

5.6%

Reported basic EPS (€)

1.20

1.51

1.28

-15.4%

6.5%

Net cash

13.7

14.7

10.0

-31.8%

-26.8%

DPS (€)

0.30

0.33

0.33*

0.0%

10.0%

Source: Esker, Edison Investment Research. Note: *Still an estimate.

Revenues were slightly ahead of our forecast, growing 15.3% y-o-y; on a constant currency, organic basis revenues grew 11% y-o-y. e-integration, which was consolidated from 1 January 2017, contributed revenues of €3.6m (+9% y-o-y) and operating profit of €0.65m (18.1% margin). The company added 76 heads in the year, of which 29 came from the consolidation of e-integration. This was ahead of our forecast for 70 additional employees and hence increased staff costs by 2% compared to our forecast. Other operating costs were also 2% ahead of our forecast. Exceptional costs of €0.5m were incurred in relation to pension provisions and the final costs of moving the company’s headquarters in Lyon. Clean operating profit was therefore 12.2% below our forecast and reported operating profit 16.4% below. The company paid an effective tax rate of 32%, versus our 33% forecast. Esker closed the year with a net cash position of €10.0m consisting of gross cash of €23.7m and a debt position of €13.7m. We note that gross cash includes €3.1m of cash on deposit for more than 12 months, which is reported within fixed assets.

During the year, the dollar and the pound weakened against the euro (the average €/$ rate in FY17 was 1.128 versus 1.107 in FY16). Currency effects reduced operating profit by €0.4m in FY17, with c 75% due to the weaker dollar and c 25% due to the weaker pound.

Exhibit 2: Revenues by product type

€m

FY16

FY17

y-o-y

SaaS

43.4

51.0

17.5%

Maintenance

8.6

7.6

-12.0%

Consulting

10.6

14.5

35.9%

Licences

2.6

2.3

-12.2%

Hardware

0.7

0.8

4.6%

Total

66.0

76.1

15.3%

SaaS-based DPA revenues

50.9

64.4

26.5%

Licence and maintenance-based DPA revenues

10.7

8.1

-24.3%

Legacy products

4.4

3.6

-18.2%

Total

66.0

76.1

15.3%

Source: Esker

In the table above, we show Esker’s revenues split in terms of product type and also by DPA versus legacy products. SaaS-based revenues grew 17.5% y-o-y as new contracts were implemented and existing customers generated higher volumes. Maintenance revenues declined, as perpetual licence sales have been in decline for several years. Consulting revenues were 35.9% higher, reflecting the large number of new contracts that were implemented in the year.

DPA revenues increased by 17.6% overall, with SaaS-related revenues (SaaS plus consulting) up 26.5% whereas licence and maintenance revenues decline 24.3%. Legacy products, which have been in decline since FY10, fell 18.2% and now make up less than 5% of revenues. Recurring revenues were 77% of the total in the year, giving the company good visibility on revenues for FY18.

Business update

Technology focus – product enhancements and security

The company increased R&D headcount by 18% y-o-y to make up 22% of the total. Management outlined the key developments made or underway, including the use of machine learning, robotic process automation and deep learning to add further automation to its product range, as well as the development of the Esker Anywhere mobile app. Work is also underway to improve the user experience and to reduce the amount of consulting time required to install the software. The company achieved ISO27001 certification during the year – this demonstrates that the company is meeting internationally recognised information security standards, crucial when supplying a cloud-based solution.

Keeping up with customer demand

The company increased consulting headcount by 27% y-o-y (now 23% of total headcount) in order to keep pace with the implementation demands of new customers. It believes that capacity utilisation has now stabilised. To accelerate the pace at which it can sign up new customers, it is starting to build out a network of channel partners. For example, the company signed a partnership with Optima ECM Consulting in the US in January. Ideally, these partners will start as implementation partners, but could end up as resellers. Management emphasised that the process of building out the network will take time, as even once partners are identified and signed up, their staff will need to be trained in the use of the software.

Early days for supply chain finance initiative

In November 2017, Esker announced that it had launched a supply chain finance initiative in Singapore in partnership with Jing King Tech Group (JK Tech). JK Tech is a provider of payment solutions, transaction security and services to the banking industry. The joint venture will connect Esker’s e-invoicing platform to a group of banking partners, including UOB, Singapore’s second largest bank. Esker and JK Tech will market NEMO, a cloud-based supply chain finance solution to banking and financing partners in China and South East Asia. Having visibility into approved invoices gives finance providers a more efficient way of assessing the credit-worthiness of customers seeking finance. If this proves popular, Esker would look to extend this type of offering into other countries.

Joint venture with Neopost progressing well

The contribution from the Neopost joint venture (in which Esker has a 30% stake) increased from €0.1m in FY16 to €0.2m in FY17. The JV launched Neotouch (the product developed by Esker for SMEs) in the US; it was previously only available in France.

Outlook and changes to forecasts

The company expects to be able to achieve double-digit organic revenue growth in FY18 – and even pointed to an acceleration in the growth rate. The dollar has weakened further against the euro year-to-date, although we had already factored in an average exchange rate of $1.22/€ for FY18. Any further weakening of the dollar could have a negative impact on revenues and operating profit.

Contracts worth €12.8m signed in FY17 were 45% higher than those signed in FY16, which in turn were 33% higher than in FY15. As the company has noted before, this value represents several years of revenues, whereas all the costs incurred in winning this business are charged in the period that the contracts were signed. Sales commission costs increased by €0.5m y-o-y. In addition, the total amount of revenue typically generated from a contract is roughly double the level originally contracted, owing to volume-based revenues. This gives the company good revenue visibility.

We have increased our FY18 revenue forecast to reflect the company’s outlook. We have also increased the cost base after factoring in the higher year-end headcount and factoring in a higher level of hiring in 2018. We have reduced our tax rate forecast from 33% to 28% to reflect the reduced tax rate in the US from the beginning of 2018.

Exhibit 3: Changes to forecasts

€m

FY18e old

FY18e new

change

y-o-y

FY19e new

y-o-y

Revenues

82.2

83.9

2.0%

10.3%

92.0

9.6%

EBITDA

18.4

18.6

1.0%

13.2%

21.5

16.1%

EBITDA margin

22.3%

22.1%

-0.2%

0.6%

23.4%

1.3%

Normalised EBIT

13.1

12.2

-7.4%

15.3%

14.8

22.1%

Normalised EBIT margin

16.0%

14.5%

-1.5%

0.6%

16.1%

1.7%

Reported EBIT

12.8

11.9

-7.5%

21.1%

14.5

22.7%

Reported EBIT margin

15.6%

14.1%

-1.5%

1.3%

15.8%

1.7%

Normalised PBT

13.3

12.5

-6.4%

17.0%

15.2

21.6%

Normalised net income

8.9

9.0

0.6%

23.5%

10.9

21.6%

Normalised dil. EPS (€)

1.54

1.55

0.6%

20.3%

1.85

19.5%

Reported basic EPS (€)

1.62

1.63

0.4%

27.3%

1.95

19.9%

Net cash

19.4

15.4

-20.8%

53.4%

22.6

47.3%

DPS (€)

0.36

0.36

0.0%

9.1%

0.39

8.3%

Source: Edison Investment Research

Valuation

We have compared Esker’s valuation to a group of companies operating in the DPA software market as well as small cap French software companies. Esker is forecast to generate revenue growth and EBIT margins ahead of the median for both peer groups. This is reflected in the premium valuation on a P/E basis. We note that companies in both peer groups are not predominantly SaaS companies, whereas Esker has been operating a SaaS business model for more than a decade. US SaaS companies in Exhibit 5 show faster growth than Esker, although are generating operating margins below the level that Esker is achieving. Esker is valued at a discount to this peer group on both EV/sales and P/E multiples.

Exhibit 4: Peer group financial and valuation metrics

Company

Share price

Market cap

Rev growth

EBIT margin

EBITDA margin

EV/Sales

P/E

m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

Esker

€ 52.30

€ 278.2

10.3%

9.6%

14.5%

16.1%

22.1%

23.4%

3.2

2.9

33.7

28.2

Software companies with DPA software offerings

Basware

€ 41.50

€ 597.7

-3.1%

8.7%

-4.5%

-6.1%

2.3%

1.0%

4.3

4.0

N/A

N/A

Bottomline

$39.39

$1,601.8

9.8%

6.0%

10.2%

11.9%

22.8%

24.1%

4.0

3.7

28.0

24.5

ITESoft

€ 3.70

€ 22.7

1.5%

12.4%

13.3%

1.1

0.0

8.6

OpenText

$34.86

$9,312

4.2%

1.5%

33.7%

34.4%

37.1%

38.2%

4.0

3.9

12.2

11.8

Average

3.1%

5.4%

13.2%

13.4%

18.6%

19.1%

3.3

2.9

16.3*

18.2*

Median

2.9%

6.0%

10.2%

11.9%

17.6%

18.7%

4.0

3.8

10.4*

11.8*

French small-cap software companies

Axway Software

€ 19.00

€ 403

-0.8%

1.2%

13.3%

16.8%

11.6%

13.2%

1.4

1.4

17.5

15.1

Claranova

€ 0.90

€ 355

51.0%

34.0%

8.1%

13.4%

8.7%

13.5%

1.2

0.9

22.6

7.5

ESI Group

€ 38.45

€ 231

7.1%

7.3%

8.0%

9.9%

9.7%

11.5%

1.8

1.7

35.0

25.4

Harvest

€ 80.00

€ 112

10.1%

10.2%

18.5%

20.2%

20.4%

22.5%

3.7

3.4

29.9

24.0

Lectra

€ 23.20

€ 734

4.5%

8.4%

13.1%

13.5%

15.6%

16.0%

2.2

2.0

25.8

22.6

Linedata Service

€ 33.15

€ 242

-4.1%

0.8%

15.7%

16.5%

26.3%

29.1%

1.9

1.8

13.1

12.9

Sidetrade

€ 63.00

€ 88

17.6%

17.3%

8.7%

12.1%

12.2%

15.4%

3.2

2.7

44.4

27.4

Average

12.2%

11.3%

12.2%

14.6%

14.9%

17.3%

2.2

2.0

26.9

19.3

Median

7.1%

8.4%

13.1%

13.5%

12.2%

15.4%

1.9

1.8

25.8

22.6

Source: Edison Investment Research, Bloomberg (as at 9 April). Note: *Excludes Basware.

Exhibit 5: US SaaS companies financial and valuation metrics

Name

Market cap ($m)

EV in rep. ccy (m)

Sales Growth 1FY (%)

Sales Growth 2FY (%)

EBITDA margin 1FY (%)

EBITDA margin 2FY (%)

EBIT margin 1FY (%)

EBIT margin 2FY (%)

EV/ Sales 1FY (x)

EV/ Sales 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

SALESFORCE.COM

87,219

84,384

21.2

19.3

23.2

24.3

16.4

17.9

6.6

5.6

55.8

44.1

WORKDAY

26,639

24,862

25.5

22.8

18.3

20.2

8.9

10.2

9.2

7.5

105.4

77.6

SERVICENOW

29,009

28,403

32.0

28.7

25.6

28.4

19.7

23.0

11.1

8.7

81.8

55.8

ATLASSIAN CORP PLC

13,154

12,494

38.2

28.5

29.3

28.9

19.0

19.5

14.6

11.3

118.4

85.2

PAYCOM SOFTWARE

6,498

6,487

25.7

23.6

39.5

39.9

35.1

35.5

11.9

9.6

44.7

35.9

PROOFPOINT

6,120

5,986

32.7

28.2

12.5

14.6

8.0

12.0

8.8

6.8

131.3

79.1

COUPA SOFTWARE

2,617

2,368

23.0

24.3

-2.9

1.2

-4.8

-0.7

10.3

8.3

N/A

N/A

ZENDESK

4,842

4,498

30.7

28.5

6.0

8.1

0.4

3.4

8.0

6.2

1191.0

161.3

TWILIO

3,585

3,293

28.2

23.5

1.5

5.1

-2.1

1.1

6.4

5.2

N/A

679.2

FIREEYE

3,337

3,219

9.1

8.3

12.3

14.5

1.5

6.2

3.9

3.6

1024.4

106.2

CORNERSTONE ONDEMAND

2,334

2,304

4.5

10.7

17.7

21.6

11.4

16.2

4.6

4.1

61.0

35.9

HORTONWORKS

1,403

1,331

25.2

24.9

6.3

12.0

-14.7

-8.8

4.1

3.3

N/A

N/A

KINAXIS INC

2,104

1,498

20.9

22.3

26.0

28.7

15.4

17.6

9.3

7.6

61.2

45.2

Average

24.4

22.6

16.6

19.1

8.8

11.8

8.4

6.8

287.5

72.6

Median

25.5

23.6

17.7

20.2

8.9

12.0

8.8

6.8

61.2

55.8

Source: Bloomberg (as at 9 April)

Exhibit 6: Financial summary

€'000s

2012

2013

2014

2015

2016

2017

2018e

2019e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

40,260

41,116

46,061

58,457

65,990

76,065

83,907

91,971

EBITDA

 

 

6,637

6,598

8,979

13,405

14,871

16,400

18,558

21,549

Operating Profit (before amort and except)

 

 

4,265

3,883

5,700

9,257

9,934

10,548

12,158

14,849

Amortisation of acquired intangibles

0

0

0

(302)

(200)

(300)

(300)

(300)

Exceptionals and other income

(16)

60

53

(245)

(474)

(456)

0

0

Other income

0

0

0

0

0

0

0

0

Operating Profit

4,249

3,943

5,753

8,710

9,260

9,792

11,858

14,549

Net Interest

38

6

220

(6)

(108)

(110)

100

100

Profit Before Tax (norm)

 

 

4,303

3,889

5,920

9,312

9,949

10,670

12,490

15,181

Profit Before Tax (FRS 3)

 

 

4,287

3,949

5,973

8,765

9,275

9,914

12,190

14,881

Tax

(1,286)

(761)

(1,323)

(2,292)

(2,950)

(3,148)

(3,413)

(4,167)

Profit After Tax (norm)

3,012

3,140

4,609

6,877

6,785

7,282

8,992

10,931

Profit After Tax (FRS 3)

3,001

3,188

4,650

6,473

6,325

6,766

8,776

10,715

Average Number of Shares Outstanding (m)

4.7

4.7

4.8

5.0

5.3

5.3

5.4

5.5

EPS - normalised (c)

 

 

64

67

97

138

128

138

167

199

EPS - normalised fully diluted (c)

 

 

60

62

90

131

122

129

155

185

EPS - (GAAP) (c)

 

 

64

68

97

130

120

128

163

195

Dividend per share (c)

14.00

18.00

24.00

30.00

30.00

33.00

36.00

39.00

EBITDA Margin (%)

16.5

16.0

19.5

22.9

22.5

21.6

22.1

23.4

Operating Margin (before GW and except) (%)

10.6

9.4

12.4

15.8

15.1

13.9

14.5

16.1

BALANCE SHEET

Fixed Assets

 

 

8,764

9,437

12,552

25,184

28,324

37,912

38,620

39,134

Intangible Assets

5,521

6,458

7,709

19,603

22,381

26,673

27,681

28,595

Tangible Assets

2,835

2,450

4,470

4,985

5,158

7,115

6,815

6,415

Other

408

529

373

596

785

4,124

4,124

4,124

Current Assets

 

 

24,358

26,834

33,894

36,110

42,024

42,823

50,962

57,979

Stocks

100

89

93

161

101

176

176

176

Debtors

11,567

12,144

15,110

18,073

19,523

21,253

23,448

25,702

Cash

11,393

13,411

17,559

16,295

21,338

20,632

26,576

31,339

Other

1,298

1,190

1,132

1,581

1,062

762

762

762

Current Liabilities

 

 

(15,551)

(16,164)

(19,827)

(24,789)

(28,299)

(27,399)

(28,918)

(30,481)

Creditors

(15,551)

(16,164)

(19,827)

(24,789)

(28,299)

(27,399)

(28,918)

(30,481)

Short term borrowings

0

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(2,019)

(1,450)

(5,113)

(7,317)

(7,657)

(13,716)

(11,216)

(8,716)

Long term borrowings

(2,019)

(1,450)

(5,113)

(7,317)

(7,657)

(13,716)

(11,216)

(8,716)

Other long term liabilities

0

0

0

0

0

0

0

0

Net Assets

 

 

15,552

18,657

21,506

29,188

34,392

39,620

49,448

57,916

CASH FLOW

Operating Cash Flow

 

 

6,163

6,539

9,245

14,307

15,331

17,312

17,882

20,858

Net Interest

122

90

310

(27)

(127)

(75)

100

100

Tax

(1,366)

(645)

(1,075)

(1,165)

(1,456)

(2,053)

(3,413)

(4,167)

Capex

(3,548)

(3,434)

(4,028)

(3,909)

(7,021)

(9,304)

(7,408)

(7,514)

Acquisitions/disposals

0

0

22

(11,700)

(335)

(7,551)

0

0

Financing

400

628

(694)

1,324

480

(345)

0

0

Dividends

(550)

(659)

(877)

(1,208)

(1,550)

(1,633)

(1,813)

(2,014)

Net Cash Flow

1,221

2,519

2,903

(2,378)

5,322

(3,649)

5,348

7,263

Opening net debt/(cash)

 

 

(8,526)

(9,354)

(11,961)

(12,446)

(8,978)

(13,681)

(10,012)

(15,360)

HP finance leases initiated

(393)

0

(2,293)

(1,090)

(645)

0

0

0

Other

(0)

88

(125)

0

26

(20)

0

0

Closing net debt/(cash)

 

 

(9,354)

(11,961)

(12,446)

(8,978)

(13,681)

(10,012)

(15,360)

(22,623)

Source: Esker, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Esker and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Esker and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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