Esker — Record order intake in Q3

Esker (PAR: ALESK)

Last close As at 12/06/2024

EUR194.50

−2.00 (−1.02%)

Market capitalisation

EUR1,176m

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Research: TMT

Esker — Record order intake in Q3

Esker’s Q3 revenue update confirmed continued strong underlying and reported revenue growth, and management reiterated its FY22 revenue and margin guidance. The company is making steady progress with its channel partner strategy, and record order intake, particularly in the US and Asia Pacific, provides support for FY23 and beyond.

TMT

Esker

F

Positive outlook

Q322 revenue update

Software & comp services

25 October 2022

Price

€118.7

Market cap

€692m

$0.99/€1

Net cash (€m) at end FY21

27.7

Shares in issue

5.8m

Free float

78%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

OTCQX

Business description

Esker provides end-to-end SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In H122, the business generated 53% of revenues from Europe, 41% from the United States and the remainder from Asia and Australia.

Next events

Q422 revenue update

January 2023

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Esker is a research client of Edison Investment Research Limited

Esker reported a strong close to the year, with Q421 revenue up 16% y-o-y despite a resurgence of the pandemic in December and FY21 revenue ahead of our estimate. Growth in both the annual recurring value and average length of contracts signed in FY21 provides support for management’s expectations of 16% revenue growth in FY22. Esker also recently agreed to acquire Market Dojo, an e-procurement software provider, to enhance its Procure-to-Pay offering. We have revised our forecasts to reflect better FY21 revenues, currency and the acquisition. Our normalised diluted EPS forecast increases by 3.2% in FY21 and reflecting investment in Market Dojo, reduces by 3.2% in FY22.

Year end

Revenue (€m)

PBT*
(€m)

Diluted EPS*
(€)

DPS
(€)

P/E
(x)

Yield

(%)

12/20

112.3

14.5

1.99

0.50

59.7

0.4

12/21

133.6

18.0

2.36

0.60

50.3

0.5

12/22e

158.9

25.4

3.20

0.65

37.1

0.5

12/23e

181.6

25.0

3.10

0.70

38.3

0.6

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

Revenue growth 19% year to date

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.

Order intake supports FY23 growth

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.

Valuation: Better value

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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