Last close As at 05/08/2026
EUR277.40
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
Esker reported FY19 revenue growth of 20%; higher than expected investment in headcount limited the increase in normalised EBIT to 7% y o y. High recurring revenues (80%) and strong order intake in FY19 (+47%) provide good visibility for FY20 and beyond. During the COVID-19 crisis, the business is providing services remotely, and while Q1 transaction volumes have not been materially affected we expect this to change in Q2. Reflecting weaker SaaS volumes and delays in signing new business in Q2, we have reduced our FY20 revenue and EPS forecasts.
Esker |
Moderating growth expectations for FY20 |
FY19 results |
Software & comp services |
31 March 2020 |
Share price performance
Business description
Next events
Analyst
Esker is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||||
Esker reported FY19 revenue growth of 20%; higher than expected investment in headcount limited the increase in normalised EBIT to 7% yoy. High recurring revenues (80%) and strong order intake in FY19 (+47%) provide good visibility for FY20 and beyond. During the COVID-19 crisis, the business is providing services remotely, and while Q1 transaction volumes have not been materially affected we expect this to change in Q2. Reflecting weaker SaaS volumes and delays in signing new business in Q2, we have reduced our FY20 revenue and EPS forecasts.
Year end |
Revenue (€m) |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
12/18 |
86.9 |
12.2 |
1.64 |
0.41 |
56.1 |
0.4 |
12/19 |
104.2 |
13.6 |
1.76 |
0.45 |
52.3 |
0.5 |
12/20e |
114.8 |
14.7 |
1.73 |
0.50 |
53.1 |
0.5 |
12/21e |
132.9 |
17.9 |
2.07 |
0.55 |
44.4 |
0.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY19: Another year of growth and investment
As previously reported, Esker saw 20% revenue growth in FY19 (18% in constant currency), with 21% constant currency growth in SaaS-related revenues and 80% recurring revenues. Higher than expected investment in headcount to support customers and channel partners and drive new business resulted in normalised operating profit and EPS below our forecast. The value of committed contracts increased 47% y-o-y – these contracts will contribute to revenues over the next three years. Net cash at year-end increased 27% y-o-y to €21m.
Reflecting potential COVID-19 impact in FY20
The majority of the business is working remotely with no disruption to service. Volumes processed by the platform had not been affected by COVID-19 restrictions as at the reporting date, but we expect there could be some weakness over the coming quarter or two. Esker may see some delay in winning new business and consulting work over the next two quarters but continues to expect double-digit revenue growth in FY20. We have revised our forecasts to reflect slower revenue growth in FY20, although we still expect growth of 10%. We have cut FY20 revenue by 4.5% and EPS by 21.4%. We forecast revenue growth of 15.8% and EPS growth of 19.7% in FY21.
Valuation: Recurring revenues limit downside
The stock is down 19% from its peak in February. While it continues to trade at a premium to document automation software and French software peers on EV/sales and P/E multiples, it is trading more in line with US SaaS software companies, which likewise have high recurring revenues, high growth and web-based delivery.
Review of FY19 results
Exhibit 1: FY19 results highlights
€m |
FY18 |
FY19e |
FY19 |
diff |
y-o-y |
Revenues |
86.9 |
104.2 |
104.2 |
0.0% |
19.9% |
EBITDA |
18.2 |
22.2 |
20.0 |
(9.7%) |
9.7% |
EBITDA margin |
21.0% |
21.3% |
19.2% |
(2.1%) |
(1.8%) |
Normalised EBIT |
11.9 |
14.9 |
12.8 |
(14.6%) |
7.1% |
Normalised EBIT margin |
13.7% |
14.3% |
12.3% |
(2.1%) |
(1.5%) |
Reported EBIT |
11.5 |
14.7 |
12.4 |
(16.2%) |
7.6% |
Reported EBIT margin |
13.2% |
14.2% |
11.9% |
(2.3%) |
(1.4%) |
Normalised PBT |
12.2 |
15.6 |
13.6 |
(13.4%) |
11.3% |
Normalised net income |
9.1 |
10.8 |
10.0 |
(7.0%) |
10.1% |
Normalised diluted EPS (€) |
1.64 |
1.89 |
1.76 |
(6.7%) |
7.3% |
Reported basic EPS (€) |
1.64 |
1.92 |
1.80 |
(6.3%) |
9.8% |
Reported diluted EPS (€) |
1.59 |
1.86 |
1.72 |
(7.6%) |
8.2% |
Net cash |
16.6 |
21.4 |
21.0 |
(1.5%) |
26.9% |
DPS (€) |
0.41 |
0.45 |
0.45 |
0.0% |
9.8% |
Source: Esker accounts, Edison Investment Research
Esker reported a revenue update for FY19 in January, at which point we had upgraded our forecasts to reflect stronger than expected revenue growth. Revenues grew 20% on a reported basis and 18% on a constant currency basis. Recurring revenues made up 80% of the total. SaaS revenues and related consulting activities totalled €94m, +21% y-o-y and making up 90% of revenues compared to 87% in FY18. On a constant currency basis, SaaS revenues grew 23% whereas consulting revenues only grew 11%. New hires were still being trained up to undertake implementation services and other consultants were involved in training channel partners.
The company hired at a faster rate than we had forecast, with 681 heads at year-end compared to our forecast for headcount of 663. Average headcount for the year of 642 was 3.2% ahead of our forecast. Staff costs before capitalisation of development costs totalled €60.0m compared to our €58.8m forecast and other operating costs were €1.0m higher than forecast. The company noted that it saw a couple of one-off expenses (€0.25m increase in the pension reserve due to a lower cost of capital and €0.4m increase in bad debt provisions for accounts in France and Italy) although we have not treated these as exceptional. The combination of higher operating costs resulted in EBITDA and EBIT below our forecasts. Esker achieved a normalised EBIT margin of 12.3% and a reported EBIT margin of 11.9%.
The company reported a €0.5m contribution from the joint venture with Quadient (previously called Neopost), 65% higher year-on-year. The company incurred tax at a rate of 26% on reported PBT, lower than our forecast 31% rate. Overall, this resulted in normalised diluted EPS 6.7% below our forecast, and 7.3% higher than a year ago.
Net cash at year-end increased to €21.0m – this includes cash of €6.2m invested for more than one year that is reported within fixed assets.
Order intake provides revenue visibility
The committed value of contracts signed totalled €27.2m in FY19, 47% higher than in FY18. The committed value includes only the fixed monthly subscription fee; on top of this Esker will earn variable transaction fees depending on the volume of documents processed. Typically, the full value of a three-year contract will be double that of the committed value. Esker charges acquisition costs (mainly sales and marketing) to the income statement when the contract is signed/renewed rather than recognising them over the life of the contract.
By geography, bookings in the Americas grew by 75%, Asia-Pacific by 59%, Europe by 47% and France by 13%.
Investing in customer and channel partner support
Overall headcount increased 18% y-o-y. In FY19, the company expanded its customer experience team, investing an additional €1m by increasing the size of the team by 28%. This team is focused on the existing customer base to ensure effective retention and upselling. Other significant increases in headcount were seen for consulting (+23%) and sales and marketing (+20%). As the company is keen to attract channel partners, particularly to undertake implementation of contracts, part of the increase in consulting headcount was to train and support channel partners. The most promising partners currently are KPMG Netherlands, Cegid in France and Fuji Xerox in Asia-Pacific. In fact, the company recently announced that in addition to reselling accounts payable solutions, Fuji Xerox was extending its partnership to reselling accounts receivable solutions.
Outlook and changes to forecasts
Managing through the COVID-19 crisis
From a supply perspective, Esker has enacted its business continuity plans, with the majority of its staff working from home. In the case of staff required to run its mail facilities, it is undertaking all necessary safety precautions.
From a demand perspective, the company has not seen any reduction in volumes processed through its platform. This may seem counterintuitive considering the general disruptions to the global supply chain. However, the company noted that it has a number of customers in the food manufacturing and pharmaceutical industries, and those customers are seeing an increase in business and hence invoices that need processing. It is also worth noting that because Esker’s software is cloud-based, end customer staff are able to use the software while working from home.
However, as the number of countries instituting lockdowns grows by the day, it is likely that volumes will be negatively affected for Q2 at least. The company noted that it may prove difficult to sign up new business over the next quarter or two, as customers focus on their own issues and as face-to-face meetings will not be possible while restrictions are in place. This would reduce consulting revenues for those projects and new SaaS revenues a quarter or two after signing up, depending on the length of the implementation process.
Company guidance still positive
Despite coronavirus, the company expects double-digit revenue growth and to grow profit in FY20 (in January it had said it expected to grow revenues to at least €120m in FY20, equating to growth of at least 15%). It is targeting operating profitability of 13–15%. With 80% recurring revenue and a €21m net cash balance, we believe the company is well-positioned to manage its way through COVID-19 related disruption.
Forecast changes
We have revised our forecasts to reflect higher headcount at the start of the year, lower new business in Q2 and Q3 and lower SaaS volumes in Q2. We note that we are not forecasting reported operating margins at the level the company is aiming for. Our forecasts assume that the company continues hiring through the course of FY20, albeit it a slower pace than in FY19 (FY20e headcount +10%, FY19: +18%). If it decides in the current environment to slow the pace of hiring, this should have a positive effect on operating profitability for FY20 and FY21, although this could have a longer-term impact on revenue growth.
Exhibit 2: Changes to forecasts
€m |
FY20e old |
FY20e new |
change |
y-o-y |
FY21e new |
y-o-y |
Revenues |
120.1 |
114.8 |
(4.5%) |
10.2% |
132.9 |
15.8% |
EBITDA |
26.0 |
22.0 |
(15.5%) |
9.8% |
25.9 |
17.8% |
EBITDA margin |
21.6% |
19.1% |
(2.5%) |
(0.1%) |
19.5% |
0.3% |
Normalised EBIT |
18.0 |
14.0 |
(22.3%) |
9.8% |
17.2 |
22.9% |
Normalised EBIT margin |
15.0% |
12.2% |
(2.8%) |
(0.0%) |
13.0% |
0.7% |
Reported EBIT |
17.7 |
13.7 |
(22.7%) |
10.7% |
16.9 |
23.4% |
Reported EBIT margin |
14.7% |
11.9% |
(2.8%) |
0.1% |
12.7% |
0.8% |
Normalised PBT |
18.7 |
14.7 |
(21.5%) |
8.6% |
17.9 |
21.8% |
Normalised net income |
12.9 |
10.2 |
(21.5%) |
1.1% |
12.4 |
21.8% |
Normalised diluted EPS (€) |
2.20 |
1.73 |
(21.4%) |
(1.5%) |
2.07 |
19.7% |
Reported basic EPS (€) |
2.24 |
1.75 |
(21.8%) |
(2.7%) |
2.10 |
20.2% |
Reported diluted EPS (€) |
2.16 |
1.69 |
(21.8%) |
(1.6%) |
2.03 |
20.2% |
Net cash |
27.8 |
26.1 |
(6.1%) |
24.1% |
31.9 |
22.0% |
DPS (€) |
0.50 |
0.50 |
0.0% |
11.1% |
0.55 |
10.0% |
Source: Edison Investment Research
Valuation
Exhibit 3 below shows Esker’s comparative valuation vs its main peers.
Exhibit 3: Peer group valuation metrics
Company |
Share |
Market |
Rev growth |
EBIT margin |
EBITDA margin |
EV/Sales |
P/E |
|||||
price |
Cap m |
CY |
NY |
CY |
NY |
CY |
NY |
CY |
NY |
CY |
NY |
|
Esker |
€ 92.0 |
€ 516 |
10.2% |
15.8% |
12.2% |
13.0% |
19.1% |
19.5% |
4.3 |
3.7 |
53.1 |
44.4 |
Software companies with DPA software offerings |
||||||||||||
Basware |
€ 18.60 |
€ 265 |
6.1% |
10.3% |
0.3% |
5.5% |
10.4% |
14.3% |
2.0 |
1.8 |
-27.1 |
-137.5 |
Bottomline |
$35.05 |
€ 1,542 |
6.5% |
9.9% |
17.0% |
17.9% |
22.4% |
23.2% |
3.4 |
3.1 |
26.2 |
22.5 |
Coupa |
$146.47 |
€ 9,495 |
25.3% |
25.6% |
5.0% |
7.8% |
8.3% |
13.2% |
19.4 |
15.5 |
440.9 |
243.6 |
ITESoft |
€ 2.26 |
€ 14 |
0.0% |
0.0% |
2.5% |
4.7% |
8.1% |
10.2% |
0.6 |
0.6 |
45.2 |
7.1 |
OpenText |
$45.95 |
€ 12,442 |
9.7% |
9.3% |
33.9% |
35.1% |
36.7% |
38.3% |
3.7 |
3.4 |
11.5 |
10.0 |
Proactis |
£0.17 |
€ 16 |
-6.7% |
8.3% |
6.9% |
7.5% |
24.0% |
23.4% |
1.2 |
1.1 |
8.3 |
6.1 |
Tungsten Corp |
£0.26 |
€ 32 |
2.9% |
4.6% |
-5.4% |
1.0% |
7.3% |
13.1% |
1.0 |
1.0 |
-15.1 |
85.8 |
Average* |
6.3% |
9.7% |
8.6% |
11.4% |
16.7% |
19.4% |
4.5 |
3.8 |
22.8 |
11.4 |
||
Median |
6.1% |
9.3% |
5.0% |
7.5% |
10.4% |
14.3% |
2.0 |
1.8 |
11.5 |
10.0 |
||
French small-cap software companies |
||||||||||||
Axway Software |
€ 15.00 |
€ 309 |
2.1% |
3.5% |
8.9% |
12.6% |
10.9% |
14.4% |
1.2 |
1.1 |
17.2 |
11.8 |
Claranova |
€ 4.59 |
€ 179 |
63.6% |
17.7% |
5.9% |
7.4% |
6.4% |
8.0% |
0.4 |
0.3 |
18.1 |
9.9 |
ESI Group |
€ 28.50 |
€ 168 |
47.1% |
5.1% |
6.4% |
7.7% |
11.0% |
12.0% |
1.5 |
1.4 |
29.3 |
20.7 |
Lectra |
€ 13.96 |
€ 444 |
-5.0% |
9.5% |
10.1% |
13.5% |
15.2% |
18.2% |
1.3 |
1.2 |
14.8 |
14.3 |
Linedata Service |
€ 19.70 |
€ 129 |
-1.0% |
4.2% |
16.0% |
16.1% |
25.6% |
24.7% |
1.2 |
1.2 |
7.7 |
6.5 |
Sidetrade |
€ 56.20 |
€ 79 |
6.6% |
17.1% |
5.1% |
1.3% |
8.2% |
4.7% |
2.9 |
2.5 |
||
Average |
18.9% |
9.5% |
8.7% |
9.8% |
12.9% |
13.7% |
1.4 |
1.3 |
17.4 |
12.6 |
||
Median |
4.4% |
7.3% |
7.7% |
10.1% |
10.9% |
13.2% |
1.3 |
1.2 |
17.2 |
11.8 |
||
US SaaS software companies |
||||||||||||
Average |
23.9% |
21.5% |
6.0% |
8.8% |
11.9% |
14.5% |
10.3 |
8.2 |
116.5 |
81.5 |
||
Median |
23.8% |
22.2% |
6.6% |
8.5% |
12.9% |
13.3% |
8.3 |
7.1 |
51.1 |
45.8 |
||
Source: Edison Investment Research, Refinitiv (30 March). Note: *Average P/E excludes Basware, Coupa and Tungsten.
Exhibit 4: Financial summary
€'000s |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
French GAAP |
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 |
114,759 |
132,944 |
EBITDA |
|
|
8,979 |
13,405 |
14,871 |
16,399 |
18,237 |
20,011 |
21,974 |
25,878 |
Operating Profit (before amort and except) |
5,700 |
9,257 |
9,934 |
10,547 |
11,913 |
12,762 |
14,018 |
17,222 |
||
Amortisation of acquired intangibles |
0 |
(302) |
(200) |
(300) |
(344) |
(344) |
(344) |
(344) |
||
Exceptionals and other income |
53 |
(245) |
(474) |
(456) |
(88) |
(62) |
0 |
0 |
||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
5,753 |
8,710 |
9,260 |
9,791 |
11,481 |
12,356 |
13,674 |
16,878 |
||
Net Interest |
220 |
(6) |
(108) |
(110) |
(57) |
268 |
100 |
100 |
||
Profit Before Tax (norm) |
|
|
5,920 |
9,312 |
9,949 |
10,669 |
12,173 |
13,553 |
14,718 |
17,922 |
Profit Before Tax (FRS 3) |
|
|
5,973 |
8,765 |
9,275 |
9,913 |
11,741 |
13,147 |
14,374 |
17,578 |
Tax |
(1,323) |
(2,292) |
(2,950) |
(3,148) |
(2,940) |
(3,402) |
(4,456) |
(5,449) |
||
Profit After Tax (norm) |
4,609 |
6,877 |
6,785 |
7,281 |
9,125 |
10,046 |
10,156 |
12,366 |
||
Profit After Tax (FRS 3) |
4,650 |
6,473 |
6,325 |
6,765 |
8,801 |
9,745 |
9,918 |
12,129 |
||
Average number of shares outstanding (m) |
4.8 |
5.0 |
5.3 |
5.3 |
5.4 |
5.5 |
5.7 |
5.8 |
||
EPS - normalised (c) |
|
|
97 |
138 |
128 |
138 |
169 |
182 |
179 |
215 |
EPS - normalised fully diluted (c) |
|
|
90 |
131 |
122 |
132 |
164 |
176 |
173 |
207 |
EPS - (GAAP) (c) |
|
|
97 |
130 |
120 |
128 |
164 |
180 |
175 |
210 |
Dividend per share (c) |
24 |
30 |
30 |
32 |
41 |
45 |
50 |
55 |
||
Gross margin (%) |
N/A |
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 |
19.2 |
19.1 |
19.5 |
||
Operating Margin (before GW and except) (%) |
12.4 |
15.8 |
15.1 |
13.9 |
13.7 |
12.3 |
12.2 |
13.0 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
12,552 |
25,184 |
28,324 |
37,912 |
39,635 |
47,201 |
48,601 |
49,501 |
Intangible Assets |
7,709 |
19,603 |
22,381 |
26,673 |
28,096 |
29,323 |
30,823 |
32,023 |
||
Tangible Assets |
4,470 |
4,985 |
5,158 |
7,115 |
7,050 |
10,434 |
10,334 |
10,034 |
||
Other |
373 |
596 |
785 |
4,124 |
4,489 |
7,444 |
7,444 |
7,444 |
||
Current Assets |
|
|
33,894 |
36,110 |
42,024 |
42,823 |
49,016 |
52,022 |
62,855 |
71,193 |
Stocks |
93 |
161 |
101 |
176 |
147 |
185 |
185 |
185 |
||
Debtors |
15,110 |
18,073 |
19,523 |
21,253 |
25,551 |
30,015 |
32,070 |
37,151 |
||
Cash |
17,559 |
16,295 |
21,338 |
20,632 |
22,794 |
21,357 |
30,135 |
33,392 |
||
Other |
1,132 |
1,581 |
1,062 |
762 |
524 |
465 |
465 |
465 |
||
Current Liabilities |
|
|
(19,827) |
(24,789) |
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(36,168) |
(39,376) |
Creditors |
(19,827) |
(24,789) |
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(36,168) |
(39,376) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(5,113) |
(7,317) |
(7,657) |
(14,909) |
(10,810) |
(8,276) |
(5,776) |
(3,276) |
Long term borrowings |
(5,113) |
(7,317) |
(7,657) |
(13,716) |
(9,318) |
(6,516) |
(4,016) |
(1,516) |
||
Other long term liabilities |
0 |
0 |
0 |
(1,193) |
(1,492) |
(1,760) |
(1,760) |
(1,760) |
||
Net Assets |
|
|
21,506 |
29,188 |
34,392 |
39,620 |
47,769 |
56,647 |
69,512 |
78,042 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
9,245 |
14,418 |
15,944 |
17,311 |
18,324 |
20,290 |
21,787 |
24,005 |
Net Interest |
310 |
(27) |
(127) |
(75) |
63 |
352 |
100 |
100 |
||
Tax |
(1,075) |
(1,165) |
(1,456) |
(2,053) |
(2,795) |
(3,329) |
(4,456) |
(5,449) |
||
Capex |
(4,028) |
(3,909) |
(7,021) |
(9,304) |
(7,789) |
(10,958) |
(9,700) |
(9,900) |
||
Acquisitions/disposals |
22 |
(11,700) |
(935) |
(7,551) |
(225) |
(523) |
0 |
0 |
||
Financing |
(694) |
1,324 |
467 |
(345) |
785 |
1,449 |
0 |
0 |
||
Dividends |
(877) |
(1,208) |
(1,550) |
(1,633) |
(1,756) |
(2,237) |
(2,653) |
(2,999) |
||
Net Cash Flow |
2,903 |
(2,267) |
5,322 |
(3,650) |
6,607 |
5,044 |
5,078 |
5,757 |
||
Opening net debt/(cash) |
|
|
(11,961) |
(12,446) |
(8,978) |
(13,681) |
(10,016) |
(16,576) |
(21,041) |
(26,119) |
HP finance leases initiated |
(2,293) |
(1,090) |
(645) |
0 |
0 |
0 |
0 |
0 |
||
Other |
(125) |
(111) |
26 |
(15) |
(48) |
(579) |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
(12,446) |
(8,978) |
(13,681) |
(10,016) |
(16,576) |
(21,041) |
(26,119) |
(31,876) |
Source: Esker accounts, Edison Investment Research
|
|
Research: Healthcare
In the current viral pandemic, it is worth recalling that brain cancers will arise during and after the epidemic. The core business case for Kazia remains strong as it is developing the only brain penetrating PI3K inhibitor agent in trials to treat glioblastoma. In the current Phase II, the 21-patient expansion cohort was fully recruited in February. No hospitalisation is needed to continue with this study; it is oral dosing. The potentially pivotal Phase III using the AGILE trial network is on track for an H220 start. H120 results showed cash of A$6.4m. Our indicative value remains A$137m.