Esker — Order momentum maintained in Q422

Esker (PAR: ALESK)

Last close As at 21/06/2024

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3.20 (1.79%)

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Research: TMT

Esker — Order momentum maintained in Q422

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.

Katherine Thompson

Written by

Katherine Thompson

Director

Esker_resized

TMT

Esker

Order momentum maintained in Q422

Q422 revenue update

Software and comp services

19 January 2023

Price

€163.1

Market cap

€952m

$1.08/€

Net cash (€m) at end FY22

32.3

Shares in issue

5.8m

Free float

78%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

7.7

26.2

(37.6)

Rel (local)

(1.8)

8.5

(36.5)

52-week high/low

€256.0

€108.6

Business description

Esker provides end-to-end SaaS-based document automation solutions supporting order-to-cash and procure-to-pay processes. In H122, the business generated 53% of revenues from Europe, 41% from the United States and the remainder from Asia and Australia.

Next events

FY22 results

23 March

Analyst

Katherine Thompson

+44 (0)20 3077 5700

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
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

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


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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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 2023 Edison Investment Research Limited (Edison).

Australia

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.

New Zealand

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.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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