Esker — On track to meet FY24 guidance

Esker (PAR: ALESK)

Last close As at 03/12/2024

EUR260.00

−0.20 (−0.08%)

Market capitalisation

EUR1,576m

More on this equity

Research: TMT

Esker — On track to meet FY24 guidance

Esker made further good progress in Q324, with constant currency (cc) revenue growth of 17% y-o-y in Q324 and 14% for 9M24. Guidance was maintained for FY24; we have revised up our forecasts with revenue at the top end of the guidance range and profitability in the middle of the range. Order intake was stable in Q324 and up 34% cc for 9M24, providing support for our FY25 forecasts. The process to acquire Esker is ongoing, with the offer expected to open within the next couple of weeks.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Esker

On track to meet FY24 guidance

Q324 revenue update

Software and comp services

17 October 2024

Price

€262.4

Market cap

€1,558m

$1.09/€

Net cash (€m) at end Q324

51.7

Shares in issue

5.9m

Free float

78%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

11.5

41.4

121.2

Rel (local)

10.4

42.8

107.5

52-week high/low

€269.2

€111.7

Business description

Esker provides end-to-end SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In FY23, the business generated 53% of revenues from Europe, 41% from North America and the remainder from Asia and Australia.

Next events

Q424 revenue update

January 2025

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Esker is a research client of Edison Investment Research Limited

Esker made further good progress in Q324, with constant currency (cc) revenue growth of 17% y-o-y in Q324 and 14% for 9M24. Guidance was maintained for FY24; we have revised up our forecasts with revenue at the top end of the guidance range and profitability in the middle of the range. Order intake was stable in Q324 and up 34% cc for 9M24, providing support for our FY25 forecasts. The process to acquire Esker is ongoing, with the offer expected to open within the next couple of weeks.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

159.0

23.4

3.04

0.75

86.2

0.3

12/23

178.5

19.8

2.48

0.65

105.9

0.2

12/24e

202.4

27.5

3.40

0.83

77.3

0.3

12/25e

229.3

32.2

3.92

1.00

66.9

0.4

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

Q324 revenue +17% y-o-y, orders +5% y-o-y

Q324 revenue increased 16% y-o-y or 17% on a constant currency basis. SaaS revenue increased 16% cc y-o-y, with subscription revenue up 26% and transaction revenue up 3%. Implementation services revenue increased 32% cc y-o-y, reflecting the high level of bookings in H124. Order intake was 5% cc higher year-on-year at €5.3m and for 9M24 was 34% higher. The group closed Q324 with net cash of €51.7m.

Guidance maintained for FY24

Management confirmed that it continues to expect constant currency organic revenue growth of 12–14% and a 12–13% operating margin in FY24. We have revised our forecasts to reflect stronger-than-expected implementation revenue in Q324 and have altered the mix of subscription and transaction revenue within SaaS revenue to reflect the slowdown in mail and fax volumes. We increase our FY24 revenue forecast by 0.4%, which implies FY24 constant currency revenue growth at the top end of the guidance range, and our operating margin forecast increases by 0.4pp to 12.6%, in the middle of the guidance range.

Valuation: Bid values company at 7.8x FY24 revenue

The share price is marginally above the proposed offer price. At the bid price of €262 per share, Esker is valued on EV/sales multiples of 7.8x FY24e and 6.9x FY25e. On an EV/EBITDA basis, the company is valued at 39.8x FY24e and 34.6x FY25e. Based on competitors that have been acquired over the last three years, this valuation is at the upper end of the range, in our view reflecting Esker’s strong track record of profitable growth and prospects for double-digit revenue growth.

Q324 revenue update

Exhibit 1 summarises revenue performance in Q324 and the nine months to 30 September (9M24).

Exhibit 1: Q3 and year-to-date revenue performance

€m

Q324

Q323

y-o-y reported

y-o-y constant currency

9M24

9M23

y-o-y reported

y-o-y constant currency

Revenue

SaaS subscriptions

24.5

19.5

25%

26%

70.4

51.9

27%

27%

SaaS transactions

17.1

16.6

3%

3%

52.8

56.6

-7%

-1%

Total SaaS

41.5

36.1

15%

16%

123.2

108.5

14%

14%

Implementation services

9.1

6.9

31%

32%

25.8

20.3

27%

27%

Legacy products

0.3

0.8

-56%

-56%

1.2

2.8

-57%

-57%

Total revenue

51.0

43.8

16%

17%

150.2

131.5

14%

14%

ARR bookings

5.3

5.3

0%

5%

18.3

14.0

31%

34%

Source: Esker

In constant currency, Q324 SaaS revenue increased 16% y-o-y, with subscription revenue up 26% y-o-y and transaction revenue up 3% y-o-y. The company noted that mail and fax volumes have been weak, mainly due to the strong weighting in France, reducing transaction revenues. The company has also in recent years signed more deals that have a low or zero transaction element. Implementation services revenue remained high as the company worked to satisfy contracts signed in H124. Legacy product revenue declined further and now makes up less than 1% of revenue.

For 9M24, SaaS revenue increased 14% y-o-y, with subscription revenue up 27% and transaction revenue down 1%. Group revenue increased 14%, trending at the top end of the guidance range. Management noted that it had opted not to increase full-year revenue guidance or narrow the range as it was taking a cautious approach to SaaS transaction revenue in Q424. As French companies are making the switch from physical mail to e-invoicing, this has an impact on transaction revenues, and it is difficult to predict the pace at which this will happen.

Order intake was 5% higher in constant currency in Q324 and 34% higher for 9M24. The company had a strong order intake in Q323 as French companies prepared for the new e-invoicing regulations. By geography for 9M24, Asia-Pacific orders increased 72% y-o-y, helped by changes to e-invoicing regulations in Malaysia, Europe (excluding France) increased 19% y-o-y, France was flat and the US grew 66% y-o-y. For Q424, the company noted that Q423 order intake was even higher, at €7.0m, so will be a tough comparative, but it believes ordering is likely to pick up again in France from Q424 or Q125.

Update on deal process

The process for the proposed acquisition by Bridgepoint and General Atlantic is ongoing. The company expects the offer to open within a couple of weeks, which would mean that the deal should close in the second half of January, assuming the 60% threshold is reached.

Changes to forecasts

Company guidance for FY24 is unchanged: constant currency organic revenue growth of 12–14% and a 12–13% operating margin. We have revised our forecasts to reflect Q324 revenue, which was higher than expected due to stronger implementation revenues. We have adjusted our revenue mix forecasts for FY24 and FY25, reflecting weaker transaction revenues. Overall, FY24 revenue increases 0.4%, which equates to constant currency revenue growth of 14% – the top of the guidance range. Our operating profit forecast increases 3.4% with the margin increasing by 0.4pp to 12.6%. Our forecasts for FY25 are substantially unchanged.

Exhibit 2: Changes to forecasts

€m

FY24e old

FY24e new

change

y-o-y

FY25e old

FY25e new

change

y-o-y

Revenues

201.5

202.4

0.4%

13.4%

228.9

229.3

0.2%

13.3%

EBITDA

38.7

39.6

2.2%

33.6%

45.5

45.5

0.0%

15.0%

EBITDA margin

19.2%

19.5%

0.3%

3.0%

19.9%

19.8%

(0.0%)

0.3%

Normalised EBIT

25.0

25.8

3.4%

42.0%

30.7

30.8

0.1%

19.1%

Normalised EBIT margin

12.4%

12.8%

0.4%

2.6%

13.4%

13.4%

(0.0%)

0.7%

Reported EBIT

24.7

25.6

3.4%

42.6%

30.5

30.5

0.1%

19.3%

Reported EBIT margin

12.3%

12.6%

0.4%

2.6%

13.3%

13.3%

(0.0%)

0.7%

Normalised PBT

26.6

27.5

3.2%

38.7%

32.2

32.2

0.1%

17.3%

Normalised net income

20.2

20.9

3.2%

39.1%

24.5

24.5

0.1%

17.3%

Reported net income

20.0

20.7

3.2%

39.2%

24.3

24.3

0.1%

17.5%

Normalised diluted EPS (€)

3.29

3.40

3.2%

37.1%

3.92

3.92

0.1%

15.4%

Reported basic EPS (€)

3.37

3.48

3.2%

37.7%

4.01

4.02

0.1%

15.5%

Reported diluted EPS (€)

3.26

3.36

3.2%

37.1%

3.89

3.89

0.1%

15.6%

Net cash

52.0

52.6

1.0%

23.2%

63.9

64.5

0.9%

22.7%

DPS (€)

0.83

0.83

0.0%

27.7%

1.00

1.00

0.0%

20.5%

Source: Edison Investment Research

Exhibit 3: Financial summary

€'m

2019

2020

2021

2022

2023

2024e

2025e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

104.2

112.3

133.6

159.0

178.5

202.4

229.3

EBITDA

 

 

20.1

21.9

25.7

31.8

29.6

39.6

45.5

Normalised Operating Profit

 

 

12.8

14.0

16.8

21.7

18.2

25.8

30.8

Amortisation of acquired intangibles

(0.4)

(0.4)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

Exceptionals and other income

(0.1)

0.0

0.0

0.0

0.0

0.0

0.0

Operating Profit

12.4

13.6

16.6

21.4

17.9

25.6

30.5

Net Interest

0.3

(0.1)

0.2

0.3

0.6

0.7

0.5

Associates & joint ventures

0.5

0.5

1.0

1.5

1.1

1.0

1.0

Exceptionals

0.0

0.5

0.4

(0.3)

0.1

0.0

0.0

Profit Before Tax (norm)

 

 

13.6

14.5

18.0

23.4

19.8

27.5

32.2

Profit Before Tax (FRS 3)

 

 

13.1

14.5

18.2

22.9

19.6

27.2

32.0

Tax

(3.4)

(3.0)

(3.9)

(5.0)

(4.8)

(6.5)

(7.7)

Profit After Tax (norm)

10.1

11.5

14.2

18.3

15.0

20.9

24.5

Profit After Tax (FRS 3)

9.7

11.6

14.3

17.9

14.9

20.7

24.3

Average No. of Shares Outstanding (m)

5.4

5.7

5.8

5.9

5.9

5.9

6.0

EPS - normalised (€)

 

 

1.86

2.03

2.42

3.11

2.55

3.51

4.05

EPS - normalised fully diluted (€)

 

 

1.79

1.99

2.37

3.04

2.48

3.40

3.92

EPS - (GAAP) (€)

 

 

1.80

2.04

2.44

3.04

2.53

3.48

4.02

Dividend per share (€)

0.33

0.50

0.60

0.75

0.65

0.83

1.00

Gross margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

19.2

19.5

19.2

20.0

16.6

19.5

19.8

Normalised Operating Margin (%)

12.3

12.5

12.6

13.6

10.2

12.8

13.4

BALANCE SHEET

Fixed Assets

 

 

47.2

49.0

57.2

71.7

75.9

79.9

83.4

Intangible Assets

29.3

30.8

33.6

47.7

51.4

54.4

56.9

Tangible Assets

10.4

10.0

9.9

9.0

8.7

8.7

8.7

Other

7.4

8.2

13.7

15.0

15.9

16.9

17.9

Current Assets

 

 

52.0

72.9

71.5

90.7

96.4

111.0

129.1

Stocks

0.2

0.3

0.3

0.5

0.3

0.4

0.4

Debtors

30.0

31.4

35.5

46.2

46.2

53.0

61.1

Cash

21.4

40.4

35.0

42.9

48.8

56.6

66.5

Other

0.5

0.8

0.7

1.1

1.1

1.1

1.1

Current Liabilities

 

 

(34.3)

(50.2)

(45.9)

(45.6)

(49.8)

(52.9)

(56.3)

Creditors

(34.3)

(38.7)

(44.7)

(45.6)

(49.8)

(52.9)

(56.3)

Short term borrowings

0.0

(11.5)

(1.2)

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(8.3)

(6.3)

(2.5)

(18.1)

(14.2)

(12.2)

(10.2)

Long term borrowings

(6.5)

(3.6)

0.0

(15.0)

(10.9)

(8.9)

(6.9)

Other long term liabilities

(1.8)

(2.7)

(2.5)

(3.1)

(3.2)

(3.2)

(3.2)

Net Assets

 

 

56.6

65.4

80.4

98.6

108.4

126.0

146.0

CASH FLOW

Operating Cash Flow

 

 

20.3

24.4

28.8

22.9

36.4

36.8

41.9

Net Interest

0.4

(0.0)

0.3

0.2

0.4

0.7

0.5

Tax

(3.3)

(0.9)

(3.4)

(4.5)

(5.3)

(6.5)

(7.7)

Capex

(11.0)

(10.2)

(11.1)

(14.7)

(16.0)

(17.0)

(17.5)

Acquisitions/disposals

(0.5)

(0.5)

(5.9)

(7.5)

(1.1)

0.0

0.0

Financing

1.4

0.0

2.8

1.1

0.3

0.0

0.0

Dividends

(2.2)

(1.9)

(2.9)

(3.6)

(4.5)

(4.0)

(5.2)

Net Cash Flow

5.0

11.0

8.5

(6.0)

10.2

9.9

12.0

Opening net debt/(cash)

 

 

(16.6)

(21.0)

(30.3)

(38.6)

(32.6)

(42.7)

(52.6)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(0.6)

(1.7)

(0.2)

(0.1)

(0.1)

(0.0)

0.0

Closing net debt/(cash)

 

 

(21.0)

(30.3)

(38.6)

(32.6)

(42.7)

(52.6)

(64.5)

Source: Esker, Edison Investment Research


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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.

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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 2024 Edison Investment Research Limited (Edison).

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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.

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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.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Research: Metals & Mining

Alkane Resources — Seamlessly shifting to Roswell

On 14 October, Alkane released its Q125 quarterly activities report, showing almost all of its operating parameters in line with both guidance and our expectations for the full year. The exceptions were its head grade, which exceeded the upper end of the guidance range by 6.1%, and AISC, which improved upon the lower end of the guidance range by 9.1%. Most significant however was confirmation that AISC guidance reflects a one-off cost for decline development that is accounted as sustaining capital (rather than as an operating expense) and as a result we have increased our earnings estimates for FY25 by A$21.2m, or 85.8x (8,479%).

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