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Research: TMT
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.
Esker |
On track to meet FY24 guidance |
Q324 revenue update |
Software and comp services |
17 October 2024 |
Share price performance
Business description
Next events
Analyst
Esker is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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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Research: Metals & Mining
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