Currency in EUR
Last close As at 27/03/2023
EUR143.60
▲ −3.50 (−2.38%)
Market capitalisation
EUR881m
Research: TMT
Esker’s Q422 revenue update confirmed that the company hit the mid-point of its revenue guidance for FY22, despite the already flagged slowdown in volumes processed. The company continued to see strong bookings intake, with the annual recurring value (ARR) of contracts for Q422 up 21% y-o-y in constant currency (cc) and up 19% cc for FY22. This provides support for management’s FY23 guidance; our FY23 estimates are within the guidance range and we maintain our forecasts pending FY22 results on 23 March.
Esker |
Order momentum maintained in Q422 |
Q422 revenue update |
Software and comp services |
19 January 2023 |
Share price performance
Business description
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Analyst
Esker is a research client of Edison Investment Research Limited |
Esker’s Q422 revenue update confirmed that the company hit the mid-point of its revenue guidance for FY22, despite the already flagged slowdown in volumes processed. The company continued to see strong bookings intake, with the annual recurring value (ARR) of contracts for Q422 up 21% y-o-y in constant currency (cc) and up 19% cc for FY22. This provides support for management’s FY23 guidance; our FY23 estimates are within the guidance range and we maintain our forecasts pending FY22 results on 23 March.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
112.3 |
14.5 |
1.99 |
0.50 |
82.1 |
0.3 |
12/21 |
133.6 |
18.0 |
2.36 |
0.60 |
69.1 |
0.4 |
12/22e |
158.9 |
25.4 |
3.20 |
0.65 |
51.0 |
0.4 |
12/23e |
181.6 |
25.0 |
3.10 |
0.70 |
52.6 |
0.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY22 revenue +13% in constant currency
Esker reported FY22 revenue of €159.3m (up 19% y-o-y or 13% cc), marginally ahead of our €158.9m forecast. In Q4, the company saw a slight decrease in documents processed due to the economic slowdown; despite this, Q4 revenue grew 18% y-o-y (13% cc) with cloud-based activities up 23% y-o-y, benefiting from subscription revenues from recent bookings, and implementation services up 11% y-o-y (8% cc). Esker closed the year with cash of €46.9m and net cash of €32.3m (our forecast: €37.2m).
Strong bookings momentum maintained
The ARR of new contracts signed in Q422 was €4.5m (up 23% y-o-y or 21% cc) and the lifetime value of those contracts was €15.3m (flat yo-y), resulting in FY22 new contract ARR of €16.6m, up 26% y-o-y or 19% cc. Bookings were strong in the US (FY22 +27% y-o-y) and Asia Pacific (+46%), whereas Europe saw only a 3% increase due to concerns around inflation and the war in Ukraine. For FY23, the company expects to be able to achieve organic revenue growth of 12–14% (we are at the top of this range) and an operating margin of 12–15% (we are at the mid-point of the range).
Valuation: Reducing the discount to SaaS peers
The share price has gained 26% over the last three months compared to a 16% increase in the Euronext Growth index. 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 (albeit this discount has reduced), 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 well-funded to take advantage of opportunities to make bolt-on acquisitions, which in the current environment may become more affordable.
Exhibit 1: Financial summary
€'000s |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
|||||||
Year end 31 December |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
|||||||
PROFIT & LOSS |
||||||||||||||
Revenue |
|
|
76,064 |
86,871 |
104,188 |
112,274 |
133,580 |
158,910 |
181,575 |
|||||
EBITDA |
|
|
16,399 |
18,279 |
20,054 |
21,927 |
25,653 |
34,124 |
35,066 |
|||||
Operating Profit (before amort and except) |
|
|
10,547 |
11,955 |
12,843 |
14,037 |
16,804 |
24,087 |
23,629 |
|||||
Amortisation of acquired intangibles |
(300) |
(344) |
(425) |
(425) |
(263) |
(263) |
(263) |
|||||||
Exceptionals and other income |
(456) |
(88) |
(62) |
0 |
0 |
0 |
0 |
|||||||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|||||||
Operating Profit |
9,791 |
11,523 |
12,356 |
13,612 |
16,541 |
23,824 |
23,366 |
|||||||
Net Interest |
(110) |
(57) |
268 |
(67) |
202 |
96 |
115 |
|||||||
Profit Before Tax (norm) |
|
|
10,669 |
12,215 |
13,634 |
14,462 |
18,008 |
25,384 |
25,044 |
|||||
Profit Before Tax (FRS 3) |
|
|
9,913 |
11,783 |
13,147 |
14,528 |
18,148 |
24,621 |
24,781 |
|||||
Tax |
(3,148) |
(2,940) |
(3,402) |
(2,966) |
(3,907) |
(5,909) |
(5,947) |
|||||||
Profit After Tax (norm) |
7,281 |
9,168 |
10,106 |
11,509 |
14,131 |
19,292 |
19,033 |
|||||||
Profit After Tax (FRS 3) |
6,765 |
8,843 |
9,745 |
11,562 |
14,241 |
18,712 |
18,834 |
|||||||
Ave. Number of Shares Outstanding (m) |
5.3 |
5.4 |
5.4 |
5.7 |
5.8 |
5.8 |
5.9 |
|||||||
EPS - normalised (c) |
|
|
138 |
170 |
186 |
203 |
242 |
331 |
321 |
|||||
EPS - normalised fully diluted (c) |
|
|
132 |
165 |
179 |
199 |
236 |
320 |
310 |
|||||
EPS - (GAAP) (c) |
|
|
128 |
164 |
180 |
204 |
244 |
321 |
317 |
|||||
Dividend per share (c) |
32 |
41 |
33 |
50 |
60 |
65 |
70 |
|||||||
Gross margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|||||||
EBITDA Margin (%) |
21.6 |
21.0 |
19.2 |
19.5 |
19.2 |
21.5 |
19.3 |
|||||||
Operating Margin (before GW and except) (%) |
13.9 |
13.8 |
12.3 |
12.5 |
12.6 |
15.2 |
13.0 |
|||||||
BALANCE SHEET |
||||||||||||||
Fixed Assets |
|
|
37,912 |
39,635 |
47,201 |
48,987 |
57,229 |
69,589 |
73,289 |
|||||
Intangible Assets |
26,673 |
28,096 |
29,323 |
30,787 |
33,644 |
46,704 |
49,204 |
|||||||
Tangible Assets |
7,115 |
7,050 |
10,434 |
10,036 |
9,896 |
9,796 |
9,696 |
|||||||
Other |
4,124 |
4,489 |
7,444 |
8,164 |
13,689 |
13,089 |
14,389 |
|||||||
Current Assets |
|
|
42,823 |
49,016 |
52,022 |
72,918 |
71,534 |
94,780 |
109,363 |
|||||
Stocks |
176 |
147 |
185 |
257 |
341 |
341 |
341 |
|||||||
Debtors |
21,253 |
25,551 |
30,015 |
31,440 |
35,548 |
44,408 |
50,742 |
|||||||
Cash |
20,632 |
22,794 |
21,357 |
40,421 |
34,978 |
49,364 |
57,613 |
|||||||
Other |
762 |
524 |
465 |
800 |
667 |
667 |
667 |
|||||||
Current Liabilities |
|
|
(26,206) |
(30,072) |
(34,300) |
(50,150) |
(45,872) |
(48,573) |
(52,036) |
|||||
Creditors |
(26,206) |
(30,072) |
(34,300) |
(38,650) |
(44,703) |
(48,573) |
(52,036) |
|||||||
Short term borrowings |
0 |
0 |
0 |
(11,500) |
(1,169) |
0 |
0 |
|||||||
Long Term Liabilities |
|
|
(14,909) |
(10,810) |
(8,276) |
(6,342) |
(2,497) |
(19,497) |
(19,497) |
|||||
Long term borrowings |
(13,716) |
(9,318) |
(6,516) |
(3,644) |
0 |
(17,000) |
(17,000) |
|||||||
Other long term liabilities |
(1,193) |
(1,492) |
(1,760) |
(2,698) |
(2,497) |
(2,497) |
(2,497) |
|||||||
Net Assets |
|
|
39,620 |
47,769 |
56,647 |
65,413 |
80,394 |
96,299 |
111,119 |
|||||
CASH FLOW |
||||||||||||||
Operating Cash Flow |
|
|
17,311 |
18,366 |
20,290 |
24,389 |
28,844 |
29,135 |
32,195 |
|||||
Net Interest |
(75) |
63 |
352 |
(30) |
253 |
96 |
115 |
|||||||
Tax |
(2,053) |
(2,795) |
(3,329) |
(884) |
(3,420) |
(5,909) |
(5,947) |
|||||||
Capex |
(9,304) |
(7,789) |
(10,995) |
(10,167) |
(11,140) |
(13,200) |
(14,100) |
|||||||
Acquisitions/disposals |
(7,551) |
(225) |
(486) |
(492) |
(5,491) |
(10,077) |
0 |
|||||||
Financing |
(345) |
785 |
1,449 |
48 |
2,769 |
2,069 |
0 |
|||||||
Dividends |
(1,633) |
(1,756) |
(2,237) |
(1,896) |
(2,897) |
(3,558) |
(4,014) |
|||||||
Net Cash Flow |
(3,650) |
6,649 |
5,044 |
10,968 |
8,918 |
(1,444) |
8,248 |
|||||||
Opening net debt/(cash) |
|
|
(13,681) |
(10,016) |
(16,576) |
(21,018) |
(30,285) |
(38,609) |
(37,164) |
|||||
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|||||||
Other |
(15) |
(90) |
(602) |
(1,701) |
(594) |
(0) |
(0) |
|||||||
Closing net debt/(cash) |
|
|
(10,016) |
(16,576) |
(21,018) |
(30,285) |
(38,609) |
(37,164) |
(45,413) |
Source: Esker, Edison Investment Research
|
|
Research: Healthcare
Following continued patient enrolment in Incannex’s ongoing Australian Phase II Psi-GAD1 study (ACTRN12621001358831), management has announced the commencement of an independent analysis of the interim data. The company expects the interim results from the study of psilocybin-assisted psychotherapy in generalised anxiety disorder (GAD) to be reported in March 2023. In our view, positive results would represent a significant catalyst for Incannex, considering the large GAD patient population (c 6.8 million US adults), lack of consistently effective first-line treatments and safety issues associated with long-term medication. We expect management to use the results of the Psi-GAD1 trial, assuming they are positive, to support potential Phase II FDA approved studies in FY23. We continue to value Incannex at US$736.6m or US$11.7 per ADR, including the issued shares from the A$13m private placement in December 2022.
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