Esker — Better outlook for FY23

Esker (PAR: ALESK)

Last close As at 23/05/2024

EUR197.90

3.70 (1.91%)

Market capitalisation

EUR1,197m

More on this equity

Research: TMT

Esker — Better outlook for FY23

Esker reported 17% y-o-y revenue growth for Q123, with 21% y-o-y growth in SaaS revenue (83% of group revenue) on an organic constant currency (cc) basis. Strong order momentum was maintained in the quarter, providing good support for our growth forecasts. With volumes processed by the Esker platform reverting to normal levels after a brief period of weakness at the end of FY22, the company revised up its FY23 revenue guidance. We maintain our forecasts, which are at the mid-point of the new revenue guidance and continue to be at the lower end of operating margin guidance.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Esker

Better outlook for FY23

Q123 revenue update

Software and comp services

19 April 2023

Price

€128.1

Market cap

€748m

$1.097:€1

Net cash (€m) at end Q123

35.4

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

(13.3)

(21.5)

(23.2)

Rel (local)

(20.0)

(25.7)

(31.7)

52-week high/low

€168.60

€108.60

Business description

Esker provides end-to-end SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In FY22, the business generated 52% of revenues from Europe, 42% from the United States and the remainder from Asia and Australia.

Next events

Q223 revenue update

18 July

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Esker is a research client of Edison Investment Research Limited

Esker reported 17% y-o-y revenue growth for Q123, with 21% y-o-y growth in SaaS revenue (83% of group revenue) on an organic constant currency (cc) basis. Strong order momentum was maintained in the quarter, providing good support for our growth forecasts. With volumes processed by the Esker platform reverting to normal levels after a brief period of weakness at the end of FY22, the company revised up its FY23 revenue guidance. We maintain our forecasts, which are at the mid-point of the new revenue guidance and continue to be at the lower end of operating margin guidance.

Year

end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

133.6

18.0

2.37

0.60

54.1

0.5

12/22

159.0

23.4

3.03

0.65

42.2

0.5

12/23e

180.1

24.2

3.01

0.70

42.5

0.5

12/24e

205.4

28.7

3.52

0.75

36.4

0.6

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

Solid Q123 performance; volumes back to normal

Esker reported Q123 revenue growth of 17% y-o-y or 15% on an organic cc basis. SaaS revenue increased 21% on an organic cc basis whereas implementation services revenue increased 8% on the same basis, reflecting the growth in business generated by channel partners. Volumes processed by Esker’s platform returned to normal levels after a small slowdown at the end of FY22. Order intake on an annual recurring revenue (ARR) basis increased 13% y-o-y to €4.12m (19% on an organic cc basis). Esker made good progress operationally, setting up a new Benelux subsidiary, widening its management team, gaining a US patent and signing up new OEM partners. New business wins included two US deals for Market Dojo and four customers making use of the Corpay payments integration.

Upward revision of revenue guidance

Management has slightly increased its revenue guidance for FY23. On an organic cc basis, it expects growth of 13–15%, up from 12–14% when it last reported in March. The operating margin range has been tightened, from 12–15% to 12–14%. We maintain our forecasts, which factor in organic cc growth of 14% and an operating margin of 12.3% for FY23.

Valuation: Reflects profitable growth strategy

Based on EV/sales and P/E ratios, the stock continues to trade at a premium to French software peers (CY P/E c 27x), we believe due to its high level of recurring revenue, history of and potential for double-digit profitable growth and strong balance sheet, and at a discount to US SaaS peers (CY P/E c 73x). With net cash of €35.4m at the end of Q123, the company is well-funded to take advantage of opportunities to make bolt-on acquisitions, which in the current environment may become more affordable.

Q123 revenue update

The table below summarises revenue and bookings reported for Q123.

Exhibit 1: Revenue and bookings

€m

Q123

Q122

y-o-y reported

y-o-y organic constant currency

Revenue

SaaS

35.4

29.3

21%

18%

Implementation services

6.3

5.8

8%

7%

Legacy products

1.1

1.4

-21%

-21%

42.8

36.5

17%

15%

Bookings

ARR

4.12

3.64

13%

19%

Lifetime value

16.2

13.3

22%

N/A

Ave length (years)

3.9

3.7

8%

N/A

Source: Esker

Strong Q1 performance; volume recovery

Group revenue of €42.8m in Q123 was 17% higher y-o-y or 15% higher on an organic cc basis. The company noted that Market Dojo revenue (acquired 1 June) made up less than 1% of revenue in Q123. SaaS revenue increased 18% on an organic cc basis, while implementation services revenue increased at a slower rate, reflecting the increasing amount of business sold through partners. As expected, legacy product revenue declined and made up less than 3% of group revenue.

When the company reported FY22 results in March, it noted that volumes processed by its platform slowed towards the end of the year, reflecting macroeconomic uncertainty. However, so far this year, volumes have returned to normal levels across all geographies.

Order intake on an ARR basis increased 13% y-o-y or 19% on an organic cc basis. Orders were 29% higher in North America and 191% higher in Europe excluding France, with a large contract won in Germany (c €600k ARR). The upcoming introduction of einvoicing regulations in France has delayed orders from customers in France (-36% y-o-y), although the company expects to be a beneficiary once customers finalise their strategies for implementation.

Product, channel and operational progress

Other notable achievements in Q123 include:

Two deals signed in the US for Market Dojo. One was with a law firm that is a new customer for Esker, the other was with an existing industrial customer. The combined ARR for these deals was €140k.

OEM deals signed with Commerce Bank and Talentia Software.

Four customers signed up to use the integration with Corpay for credit card payment processing. Esker will be entitled to a revenue share from the transactions processed by Corpay.

Four customers signed contracts that use the Microsoft Dynamics 365 Finance & Operations (F&O) connector.

The grant of a US patent for auto-learning.

The creation a new Benelux subsidiary, based in Belgium, and the appointment of a Benelux country head.

Revenue outlook upgraded

In March, the company guided to organic cc revenue growth of 12–14% for FY23; it has now increased this to 13–15% and narrowed the operating margin guidance from 12–15% to 12–14%. We maintain our forecasts, which incorporate organic cc revenue growth of 14% (the mid-point of the new range) and an operating margin of 12.3% (at the lower end of the range). If order and volume momentum is maintained into Q223, the risk to our forecasts would be to the upside.


Exhibit 2: Financial summary

€'000s

2017

2018

2019

2020

2021

2022

2023e

2024e

Year end 31 December

French GAAP

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

158,987

180,096

205,427

EBITDA

 

 

16,399

18,279

20,054

21,927

25,653

31,802

33,927

39,700

Operating Profit (before amort and except)

 

 

10,547

11,955

12,843

14,037

16,844

21,672

22,490

26,963

Amortisation of acquired intangibles

(300)

(344)

(425)

(425)

(263)

(263)

(263)

(263)

Exceptionals and other income

(456)

(88)

(62)

0

0

0

0

0

Other income

0

0

0

0

0

0

0

0

Operating Profit

9,791

11,523

12,356

13,612

16,581

21,409

22,227

26,700

Net Interest

(110)

(57)

268

(67)

202

272

125

125

Profit Before Tax (norm)

 

 

10,669

12,215

13,634

14,462

18,048

23,441

24,165

28,688

Profit Before Tax (FRS 3)

 

 

9,913

11,783

13,147

14,528

18,188

22,879

23,902

28,425

Tax

(3,148)

(2,940)

(3,402)

(2,966)

(3,907)

(5,015)

(5,736)

(6,822)

Profit After Tax (norm)

7,281

9,168

10,106

11,509

14,171

18,303

18,365

21,803

Profit After Tax (FRS 3)

6,765

8,843

9,745

11,562

14,281

17,864

18,165

21,603

Ave. Number of Shares Outstanding (m)

5.3

5.4

5.4

5.7

5.8

5.9

5.9

6.0

EPS - normalised (c)

 

 

138

170

186

203

242

310

311

364

EPS - normalised fully diluted (c)

 

 

132

165

179

199

237

303

301

352

EPS - (GAAP) (c)

 

 

128

164

180

204

244

303

308

360

Dividend per share (c)

32

41

33

50

60

65

70

75

Gross margin (%)

N/A

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

20.0

18.8

19.3

Operating Margin (before GW and except) (%)

13.9

13.8

12.3

12.5

12.6

13.6

12.5

13.1

BALANCE SHEET

Fixed Assets

 

 

37,912

39,635

47,201

48,987

57,229

71,650

75,600

79,200

Intangible Assets

26,673

28,096

29,323

30,787

33,644

47,651

50,151

52,151

Tangible Assets

7,115

7,050

10,434

10,036

9,896

8,986

8,886

8,886

Other

4,124

4,489

7,444

8,164

13,689

15,013

16,563

18,163

Current Assets

 

 

42,823

49,016

52,022

72,918

71,534

90,671

103,740

120,788

Stocks

176

147

185

257

341

512

512

512

Debtors

21,253

25,551

30,015

31,440

35,548

46,158

50,328

57,407

Cash

20,632

22,794

21,357

40,421

34,978

42,887

51,786

61,755

Other

762

524

465

800

667

1,114

1,114

1,114

Current Liabilities

 

 

(26,206)

(30,072)

(34,300)

(50,150)

(45,872)

(45,533)

(48,375)

(51,787)

Creditors

(26,206)

(30,072)

(34,300)

(38,650)

(44,703)

(45,533)

(48,375)

(51,787)

Short term borrowings

0

0

0

(11,500)

(1,169)

0

0

0

Long Term Liabilities

 

 

(14,909)

(10,810)

(8,276)

(6,342)

(2,497)

(18,148)

(18,148)

(18,148)

Long term borrowings

(13,716)

(9,318)

(6,516)

(3,644)

0

(15,034)

(15,034)

(15,034)

Other long term liabilities

(1,193)

(1,492)

(1,760)

(2,698)

(2,497)

(3,114)

(3,114)

(3,114)

Net Assets

 

 

39,620

47,769

56,647

65,413

80,394

98,640

112,817

130,053

CASH FLOW

Operating Cash Flow

 

 

17,311

18,366

20,290

24,389

28,844

22,410

32,599

36,032

Net Interest

(75)

63

352

(30)

253

866

125

125

Tax

(2,053)

(2,795)

(3,329)

(884)

(3,420)

(5,074)

(5,736)

(6,822)

Capex

(9,304)

(7,789)

(10,995)

(10,167)

(11,140)

(12,492)

(14,100)

(15,000)

Acquisitions/disposals

(7,551)

(225)

(486)

(492)

(5,491)

(8,902)

0

0

Financing

(345)

785

1,449

48

2,769

792

0

0

Dividends

(1,633)

(1,756)

(2,237)

(1,896)

(2,897)

(3,555)

(3,988)

(4,367)

Net Cash Flow

(3,650)

6,649

5,044

10,968

8,918

(5,955)

8,900

9,969

Opening net debt/(cash)

 

 

(13,681)

(10,016)

(16,576)

(21,018)

(30,285)

(38,609)

(32,653)

(41,552)

HP finance leases initiated

0

0

0

0

0

0

0

0

Other

(15)

(90)

(602)

(1,701)

(594)

(1)

(0)

0

Closing net debt/(cash)

 

 

(10,016)

(16,576)

(21,018)

(30,285)

(38,609)

(32,653)

(41,552)

(51,521)

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Esker

View All

Latest from the TMT sector

View All TMT content

Research: Healthcare

Basilea Pharmaceutica — Zevtera NDA submission pushed to Q323

Basilea has announced that there will be a minor delay in the timing of its new drug application (NDA) for Zevtera (ceftobiprole) to the FDA and it now anticipates submission in Q323 (previously H123). The decision comes because one of Basilea’s contract manufacturing organisations requires an additional three to six months to adapt its quality control systems before FDA inspection, a prerequisite for NDA review. Following the NDA submission, Basilea expects a regulatory decision on the approval of Zevtera in the United States by Q224. Management does not expect the recent news to affect its FY23 financial guidance and we believe a US launch date for Zevtera by late FY24 remains feasible.

Continue Reading
misael-moreno-fN6K30xtiKE-unsplash-Basilea

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free