Esker |
Strong guidance for FY20 |
FY19 revenue update |
Software & comp services |
20 January 2020 |
Share price performance
Business description
Next events
Analyst
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* |
Diluted EPS* |
DPS |
P/E |
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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