Esker — Record order intake in Q3

In its recent Q322 revenue update, Esker confirmed that Q322 revenue had grown 21% y-o-y/13% in constant currency (cc) and 9M22 revenue was 19% higher y-o-y (13% cc). SaaS revenue (81% of group revenue) was 26% higher y-o-y (17% cc) for Q3 and 24% higher (17% cc) for 9M22. Company guidance for organic constant currency revenue growth of 12–14% was maintained (our forecast is at the lower end of this range), as was operating margin guidance of 13–15%. Our FY23 forecast for 14.3% revenue growth already factors in some conservatism around the transaction element of SaaS revenues.

In Q322, Esker signed contracts worth €18m in total contract value or €4.9m on an annual recurring revenue (ARR) basis – both records for Esker. For 9M22, ARR order intake was 20% higher cc. While Q3 order intake grew strongly in the US and Asia Pacific, Europe saw a decline due to economic concerns. The company noted that it is seeing increasing demand for its purchase-to-pay solution, helped by internal product development and the recent Market Dojo acquisition, which have filled out the solution’s procurement functionality. Recent enhancements to the order-to-cash solution are also contributing to growth.

The share price appears to have stabilised after declining from its December 2021 peak of €361.5. Based on FY22e and FY23e 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 is wellfunded to take advantage of opportunities to make bolt-on acquisitions, which in the current environment may become more affordable.

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