Last close As at 05/08/2026
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Research: TMT
EQS has built a strong platform business in corporate compliance and investor relations, with growing recurring revenues. It is well positioned to capitalise on the time-limited expansion opportunity presented by the European Whistleblowing Directive, which has an implementation deadline of December 2021. Achieving a strong foothold here will be key for driving greater SaaS customer acquisition, underpinning management’s ambitious medium-term revenue and margin guidance.
EQS |
Grasping the whistleblowing opportunity
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Software & Computer Services |
Deutsches Eigenkapitalforum 2021
21 October 2021 |
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Business description
Bull
Bear
Analyst
EQS Group is a research client of Edison Investment Research Limited |
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EQS has built a strong platform business in corporate compliance and investor relations, with growing recurring revenues. It is well positioned to capitalise on the time-limited expansion opportunity presented by the European Whistleblowing Directive, which has an implementation deadline of December 2021. Achieving a strong foothold here will be key for driving greater SaaS customer acquisition, underpinning management’s ambitious medium-term revenue and margin guidance.
Solutions for the fast-growing compliance market
EQS is in a good position to build out its customer base and its recurring revenues in both its activities of corporate compliance and investor relations, but it is the compliance area that should provide the more dynamic growth profile. The core investment in the cloud-based platform is already made, allowing for additional modules to be bolted on and cross-sold. Management is targeting group revenue of c €130m by FY25, with an EBITDA margin of 30%, with Compliance revenues comprising around 75% of group. Achieving these ambitious targets requires the group to exploit the full potential of recent acquisitions and to take maximum advantage of the current window of opportunity.
Whistleblowing to drive H221 growth
The European Whistleblowing Directive’s implementation deadline of December 2021 presents a clear opportunity to greatly enlarge EQS’s customer base. July’s acquisition of Business Keeper, the German market leader for whistleblowing systems, has already helped accelerate the effort, lifting the number of new SaaS customers from 266 in May to 445 at end-July. Management’s FY21 guidance for new SaaS customers was raised at the interim results to a range of 1,750–2,250 (previously 1,500–2,000), New ARR for FY21 is expected to be €9m (was €6m), with revenue growth of 30–40% anticipated. EBITDA and margins are expected to remain suppressed in FY21 due to whistleblowing-related higher marketing costs.
Valuation: Discount to global peers
The shares have retreated from the highs seen in late-August, post the interim results, and are now trading around the levels seen earlier in the summer. With profitability subdued by the additional costs of addressing the short-term opportunity, comparative earnings metrics are of limited relevance currently. On EV/Sales, taken across FY20–22e to smooth out pandemic impact, EQS continues to trade at a significant discount to its basket of international software peers, on average at a discount of 43%.
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Edison estimates
Source: Company accounts, Edison Investment Research |
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Research: TMT
GB Group (GBG) confirmed that its Identity business continued to benefit from a number of exceptional volume drivers in H122, resulting in 12.4% y-o-y organic constant currency revenue growth and a 25.2% operating margin for the group. With management expectations for H222 unchanged, we upgrade our forecasts to incorporate these windfall revenues and slightly better growth in the Fraud and Location divisions.