Esker — Strong guidance for FY20

Esker (PAR: ALESK)

Last close As at 17/04/2024

EUR183.00

2.00 (1.10%)

Market capitalisation

EUR1,107m

More on this equity

Research: TMT

Esker — Strong guidance for FY20

Esker saw SaaS-based revenue growth accelerate through 2019 as previously signed contracts started to contribute and existing customers grew volumes processed through the platform. With FY19 revenues ahead of our forecast and guidance for revenue growth of at least 15% in FY20, we have raised our revenue and EPS forecasts for both years. Revenues are now more than 90% SaaS based, with c 80% recurring revenues providing good visibility for future growth.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Esker

Strong guidance for FY20

FY19 revenue update

Software & comp services

20 January 2020

Price

€103.8

Market cap

€582m

$1.12/€

Net cash (€m) at end FY19

20.2

Shares in issue

5.6m

Free float

68%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

16.0

25.1

49.6

Rel (local)

13.5

16.6

19.1

52-week high/low

€104.2

€65.7

Business description

Esker provides end-to-end document automation solutions, offering on-demand and on-premise delivery models. In FY18, the business generated 58% of revenues from Europe, 37% from the US and the remainder from Asia and Australia.

Next events

FY19 results

19 March 2020

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Esker is a research client of Edison Investment Research Limited

Esker saw SaaS-based revenue growth accelerate through 2019 as previously signed contracts started to contribute and existing customers grew volumes processed through the platform. With FY19 revenues ahead of our forecast and guidance for revenue growth of at least 15% in FY20, we have raised our revenue and EPS forecasts for both years. Revenues are now more than 90% SaaS based, with c 80% recurring revenues providing good visibility for future growth.

Year end

Revenue (€m)

PBT*
(€m)

Diluted EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

76.1

10.7

1.32

0.32

78.8

0.3

12/18

86.9

12.2

1.64

0.41

63.3

0.4

12/19e

104.2

15.6

1.89

0.45

55.0

0.4

12/20e

120.1

18.7

2.20

0.50

47.1

0.5

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

Strong finish to the year

Esker reported Q4 revenue of €28.7m, 22% higher year-on-year on a reported basis and 21% higher on a constant currency (cc) basis. For FY19, this resulted in revenues of €104.2m (+20% reported, +18% cc), 3.6% ahead of our €100.6m forecast. SaaS-based revenues accelerated to growth of 25% cc in Q4, compared to 17% in Q1, 21% in Q2 and 22% in Q3, and now make up more than 90% of revenues. For FY19 on a cc basis, SaaS-based revenues grew 21%, licence and maintenance revenues declined 22% and legacy products grew 25%.

Positive outlook drives upgrades

Esker signed new contracts worth €28m in FY19, 41% higher than in FY18 and expects to generate revenues of at least €120m in FY20 (compared to our €114.6m forecast). The company previously pointed to a target revenue growth rate of 20% per year. This was achieved on a reported basis in FY19, although was slightly below on a cc basis. Guidance suggests a growth rate of 15% in FY20 and we have raised our estimates to reflect this. We maintain operating margins approaching 15%, resulting in upgrades to our normalised EPS forecasts of 8.4% in FY19 and 4.1% in FY20.

Valuation: Recent performance reflects Q4 upside

Esker’s stock has gained 48% over the last year and 13% in the last month alone. It trades at a premium to French small-cap software peers and global DPA software providers. Compared to companies with a similar SaaS business model, however, Esker trades at a discount on all multiples. As the company accelerates revenue growth towards its 20% target, we would expect the shares to re-rate. We note that Esker has a strong balance sheet with €20m net cash, representing ample funds to support growth via internal investment or selective M&A.

Exhibit 1: Financial summary

€'000s

2014

2015

2016

2017

2018

2019e

2020e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

46,061

58,457

65,990

76,064

86,871

104,174

120,126

EBITDA

 

 

8,979

13,405

14,871

16,399

18,237

22,154

25,997

Operating Profit (before amort and except)

 

 

5,700

9,257

9,934

10,547

11,913

14,948

18,041

Amortisation of acquired intangibles

0

(302)

(200)

(300)

(344)

(344)

(344)

Exceptionals and other income

53

(245)

(474)

(456)

(88)

139

0

Other income

0

0

0

0

0

0

0

Operating Profit

5,753

8,710

9,260

9,791

11,481

14,743

17,697

Net Interest

220

(6)

(108)

(110)

(57)

200

100

Profit Before Tax (norm)

 

 

5,920

9,312

9,949

10,669

12,173

15,648

18,741

Profit Before Tax (FRS 3)

 

 

5,973

8,765

9,275

9,913

11,741

15,443

18,397

Tax

(1,323)

(2,292)

(2,950)

(3,148)

(2,940)

(4,787)

(5,703)

Profit After Tax (norm)

4,609

6,877

6,785

7,281

9,125

10,797

12,931

Profit After Tax (FRS 3)

4,650

6,473

6,325

6,765

8,801

10,656

12,694

Average Number of Shares Outstanding (m)

4.8

5.0

5.3

5.3

5.4

5.5

5.7

EPS - normalised (c)

 

 

97

138

128

138

169

195

228

EPS - normalised fully diluted (c)

 

 

90

131

122

132

164

189

220

EPS - (GAAP) (c)

 

 

97

130

120

128

163

192

224

Dividend per share (c)

24

30

30

32

41

45

50

Gross margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

19.5

22.9

22.5

21.6

21.0

21.3

21.6

Operating Margin (before GW and except) (%)

12.4

15.8

15.1

13.9

13.7

14.3

15.0

BALANCE SHEET

Fixed Assets

 

 

12,552

25,184

28,324

37,912

39,635

42,185

43,585

Intangible Assets

7,709

19,603

22,381

26,673

28,096

29,696

31,196

Tangible Assets

4,470

4,985

5,158

7,115

7,050

8,000

7,900

Other

373

596

785

4,124

4,489

4,489

4,489

Current Assets

 

 

33,894

36,110

42,024

42,823

49,016

57,964

66,376

Stocks

93

161

101

176

147

147

147

Debtors

15,110

18,073

19,523

21,253

25,551

29,112

33,569

Cash

17,559

16,295

21,338

20,632

22,794

28,181

32,136

Other

1,132

1,581

1,062

762

524

524

524

Current Liabilities

 

 

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(33,190)

(36,066)

Creditors

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(33,190)

(36,066)

Short term borrowings

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(5,113)

(7,317)

(7,657)

(14,909)

(10,810)

(8,310)

(5,810)

Long term borrowings

(5,113)

(7,317)

(7,657)

(13,716)

(9,318)

(6,818)

(4,318)

Other long term liabilities

0

0

0

(1,193)

(1,492)

(1,492)

(1,492)

Net Assets

 

 

21,506

29,188

34,392

39,620

47,769

58,648

68,086

CASH FLOW

Operating Cash Flow

 

 

9,245

14,307

15,331

17,311

18,324

21,712

24,414

Net Interest

310

(27)

(127)

(75)

63

200

100

Tax

(1,075)

(1,165)

(1,456)

(2,053)

(2,795)

(4,787)

(5,703)

Capex

(4,028)

(3,909)

(7,021)

(9,304)

(7,789)

(10,100)

(9,700)

Acquisitions/disposals

22

(11,700)

(335)

(7,551)

(225)

0

0

Financing

(694)

1,324

480

(345)

785

0

0

Dividends

(877)

(1,208)

(1,550)

(1,633)

(1,756)

(2,237)

(2,656)

Net Cash Flow

2,903

(2,378)

5,322

(3,650)

6,607

4,788

6,455

Opening net debt/(cash)

 

 

(11,961)

(12,446)

(8,978)

(13,681)

(10,011)

(16,576)

(21,363)

HP finance leases initiated

(2,293)

(1,090)

(645)

0

0

0

0

Other

(125)

0

26

(20)

(43)

0

0

Closing net debt/(cash)

 

 

(12,446)

(8,978)

(13,681)

(10,011)

(16,576)

(21,363)

(27,818)

Source: Esker, Edison Investment Research


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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 £49,500 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.

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United Kingdom

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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.

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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

1,185 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

1,185 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 £49,500 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 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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.

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

1,185 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

1,185 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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