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Alongside its H124 results, Esker confirmed that Bridgepoint, in association with General Atlantic and management shareholders, is proposing a cash public tender offer for the company at €262 per share. This represents a 30% premium to the unaffected share price on 8 August. The supervisory board has welcomed the principle of the offer. If the tender offer is successful (ie 60% or more of shares are tendered), the deal is expected to complete in late Q424 or early Q125.
Esker |
Proposed bid for the company confirmed |
H124 results |
Software and comp services |
25 September 2024 |
Share price performance
Business description
Next events
Analyst
Esker is a research client of Edison Investment Research Limited |
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Alongside its H124 results, Esker confirmed that Bridgepoint, in association with General Atlantic and management shareholders, is proposing a cash public tender offer for the company at €262 per share. This represents a 30% premium to the unaffected share price on 8 August. The supervisory board has welcomed the principle of the offer. If the tender offer is successful (ie 60% or more of shares are tendered), the deal is expected to complete in late Q424 or early Q125.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
159.0 |
23.4 |
3.04 |
0.75 |
87.5 |
0.3 |
12/23 |
178.5 |
19.8 |
2.48 |
0.65 |
107.5 |
0.2 |
12/24e |
201.5 |
26.6 |
3.29 |
0.83 |
80.9 |
0.3 |
12/25e |
228.9 |
32.2 |
3.92 |
1.00 |
68.0 |
0.4 |
Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Bid confirmed, values company at €1.6bn
On 12 August Esker confirmed it was in discussions with Bridgepoint regarding a potential offer for the company. On 19 September, Esker confirmed that a company controlled by Bridgepoint intends to launch a tender offer for all outstanding shares. At €262 per share and on a fully diluted basis, the bid values the company at €1,621m. The offeror expects to file the tender offer with the French authorities as soon as it has received a favourable opinion from the supervisory board. Once launched, the tender offer is expected to be open for five weeks, with the potential for a two-week extension. The current management team is expected to remain with Esker and will work with the new owners to accelerate the growth of the company.
FY24 outlook and estimates maintained
H124 revenue increased 13% y-o-y, operating profit increased 30% y-o-y (operating margin 12.8%) and net income increased 25% y-o-y. Management confirmed that it continues to expect constant currency organic revenue growth of 12–14% and a 12–13% operating margin in FY24. We maintain our forecasts.
Valuation: Bid values company at 7.8x FY24 revenue
The stock has risen slightly above the proposed offer price, suggesting the market is factoring in the possibility of a counter-bid. At the bid price of €262 per share, the company is valued on an EV/sales multiple of 7.8x FY24e and 6.9x FY25e. On an EV/EBITDA basis, the company is valued at 40.6x 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.
Proposed offer for the company
On 9 August, press reports suggested that Esker was in discussions with Bridgepoint regarding a potential offer for the company. On 12 August, the company confirmed that this was the case, noting that it regularly held discussions with potential buyers.
On 19 September, the company announced that Bridgepoint, in association with General Atlantic and management shareholders, had proposed a cash public tender offer for Esker shares.
Terms of the proposed deal
The bidding company, Boréal Bidco SAS, is a company controlled by Bridgepoint Group plc. Boréal Bidco plans to launch a tender offer for all Esker shares at a cash price of €262 per share.
Steps to be completed include:
■
The supervisory board has appointed an independent expert, Finexsi, to provide a fairness opinion on the financial terms of the offer. The supervisory board has set up an ad hoc committee comprising the three independent directors: Marie-Claude Bernal, Jean-Pierre Lac and Nicole Pelletier Perez. The committee will supervise the work of the independent expert and make recommendations to the supervisory board, in particular, with regard to the independent expert’s report. It will also consider the opinion of the company’s works council before issuing a reasoned opinion on the offer.
■
Boréal Bidco expects to file a proposed public tender offer with the Autorité des marchés financiers (AMF) as soon as possible after the supervisory board delivers a unanimously favourable opinion.
■
The offer would be opened during Q424, subject to the Italian foreign investments control authorities’ clearance.
■
Closing of the offer should take place by the end of Q424 or at the latest during Q125, subject to obtaining the required anti-trust clearances.
■
If the number of shares tendered does not reach 60% of shares outstanding, Boréal Bidco has the right to withdraw the offer.
■
If more than 90% of shares are tendered, Boréal Bidco will request the implementation of a mandatory squeeze-out procedure.
Break-up fees are payable: €30m by Esker if the supervisory board does not issue its reasoned opinion despite having received a fairness opinion from the independent expert or if the supervisory board recommends a competing offer or if a competing offer is successful; €10m by Boréal Bidco if it does not file the proposed offer with the AMF despite the satisfaction of relevant conditions.
Management reinvesting in the deal
CEO Jean-Michel Bérard and COO Emmanuel Olivier together hold 670,623 shares (c 10.8% of fully diluted share capital) and have undertaken to tender a portion of their shares to Boréal Bidco and to make a contribution in kind of their remaining shares to an entity directly or indirectly controlling Boréal Bidco. Management noted that Bridgepoint wants to keep the entire Esker management team.
Deal rationale
Management commented that in recent years, the burden of being a public company had prevented it from investing for growth at the pace it would have liked. An increasing proportion of management time was required for investor relations and the company valuation prevented it from participating in certain deals, as it could not bid as high or as quickly as some competitors. As a private company, management expects to work on a five-year plan that should allow the company to invest more in growing the business upfront without having to meet public market expectations for operating margins. It should also give the company more flexibility if suitable acquisition targets arise.
Valuation reflects track record of growth
The price represents a 30.1% premium to the share price on 8 August, the day before press speculation began regarding a potential offer. It represents a 37.2% premium over the last three months, 43.6% over the last six months and 62.4% over the last 12 months.
In the table below, we show how this values Esker based on our forecasts for FY24 and FY25. We also provide details of deals in the same market over the last three years. The higher valued deals have typically been for those companies with strong forecast revenue growth. Coupa’s growth expectations were lower than for Pagero and Billtrust, but the company was highly profitable and we believe this was factored into the valuation. It is also worth noting that average one-year forward EV/sales multiples for US SaaS companies have ranged from as high as c 20x in 2021 to c 6x today.
Exhibit 1: Esker valuation at offer price versus recent deals
Target |
Bidder |
Date completed |
C’cy |
Value |
Enterprise value (m) |
Rev growth |
EBITDA margin |
EV/sales (x) |
EV/EBITDA (x) |
|||
FY1e |
FY2e |
FY1e |
FY1e |
FY2e |
FY1e |
FY2e |
||||||
Esker |
Bridgepoint/ General Atlantic |
N/A |
€ |
1,621 |
1,573 |
13% |
14% |
19% |
7.8 |
6.9 |
40.6 |
34.6 |
Proactis |
Pollen St/DBAY |
Jul 2021 |
£ |
74.9 |
121.4 |
3% |
3% |
25% |
2.4 |
2.3 |
9.5 |
8.7 |
Bottomline |
Thoma Bravo |
May 2022 |
$ |
2,600 |
2,600 |
10% |
11% |
20% |
5.0 |
4.5 |
24.7 |
22.5 |
Tungsten |
Kofax |
Jun 2022 |
£ |
70.6 |
68.7 |
7% |
3% |
12% |
1.8 |
1.7 |
14.3 |
12.5 |
Basware |
Longpath/Briarwood/ Accel-KKR |
Jul 2022 |
€ |
619.9 |
660.2 |
5% |
9% |
15% |
4.1 |
3.7 |
27.2 |
22.0 |
Kofax |
Clearlake/TA |
Jul 2022 |
$ |
3,000 |
3,000 |
N/A |
N/A |
30% |
4.0 |
13.3 |
||
Billtrust |
EQT |
Dec 2022 |
$ |
1,700 |
1,552 |
55% |
22% |
loss-making |
9.2 |
7.5 |
N/A |
N/A |
Coupa |
Thoma Bravo |
Feb 2023 |
$ |
8,000 |
8,000 |
16% |
18% |
25% |
9.5 |
8.1 |
38.8 |
43.8 |
Pagero |
Thomson Reuters |
Jan 2024 |
SEK |
8,059 |
8,344 |
33% |
33% |
loss-making |
7.9 |
6.0 |
N/A |
N/A |
Source: Edison Investment Research, company accounts, LSEG Data & Analytics, press articles
Review of H124 results
Exhibit 2 summarises the H124 results.
Exhibit 2: H124 results highlights
€m |
H124 |
H123 |
y-o-y |
Revenues |
99.2 |
87.9 |
13.0% |
EBITDA |
19.2 |
15.7 |
21.8% |
EBITDA margin |
19.3% |
17.9% |
1.4% |
Reported operating profit |
12.7 |
9.8 |
29.9% |
Operating margin |
12.8% |
11.2% |
1.7% |
Reported net income |
9.3 |
7.5 |
24.6% |
Net cash |
48.2 |
33.5 |
43.8% |
Source: Esker
The company had already reported Q224/H124 revenue and bookings in July. Revenue for H124 was 13% higher year-on-year on a reported and constant currency basis. Reported operating profit was 30% higher year-on-year. As previously discussed, the company slowed the pace of hiring during H124, with average headcount only increasing 7.8% y-o-y to 1,042 (end FY23 headcount: 1,028). Personnel and related tax expenses totalled €62.5m, up 14% y-o-y. The company explained that underlying salary costs had increased 8.6% y-o-y, with roughly half the increase from higher headcount and the remainder from salary increases. The company accrues for tax on free shares – as the value of shares has increased this year (from €155.8 on 1 January to €175.7 on 30 June) this has increased compared to last year. The company has also accrued for profit sharing at a higher level than the prior year (€3.4m vs €2.3m in H123). Purchase and external expenses only grew 3% y-o-y. Overall, total costs increased 10.8% y-o-y, resulting in operating margin expansion from 11.2% to 12.8%. After net interest income of €0.6m, a joint venture contribution of €0.5m and a tax charge of €4.5m, Esker reported net income of €9.3m, +25% y-o-y.
Net cash at the end of H124 increased to €48.2m from €42.7m at the end of FY23.
Management maintained its FY24 guidance for constant currency revenue growth of 12–14% with an operating margin in the range of 12–13%. We maintain our forecasts.
Product news
■
Launch of Synergy Transformer AI to streamline order processing by optimising data extraction, using a custom-trained language model. It increases automation by 6% compared to the previous iteration of the software, reaching a 92% recognition rate. The smaller model size is more sustainable and resource efficient than the generative pre-trained transformer models such as ChatGPT.
■
PDP registration: in August, the company was officially registered by France’s Direction Générale des Finances Publiques (DGFiP) as a plateforme de dématérialisation partenaire (PDP) for electronic invoicing. The application was originally submitted in June 2023. Esker has been working with a group of customers from a range of industries and with its network of partners to prepare the pilot phase project.
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 |
201.5 |
228.9 |
EBITDA |
|
|
20.1 |
21.9 |
25.7 |
31.8 |
29.6 |
38.7 |
45.5 |
Normalised Operating Profit |
|
|
12.8 |
14.0 |
16.8 |
21.7 |
18.2 |
25.0 |
30.7 |
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 |
24.7 |
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 |
26.6 |
32.2 |
Profit Before Tax (FRS 3) |
|
|
13.1 |
14.5 |
18.2 |
22.9 |
19.6 |
26.4 |
31.9 |
Tax |
(3.4) |
(3.0) |
(3.9) |
(5.0) |
(4.8) |
(6.3) |
(7.7) |
||
Profit After Tax (norm) |
10.1 |
11.5 |
14.2 |
18.3 |
15.0 |
20.2 |
24.5 |
||
Profit After Tax (FRS 3) |
9.7 |
11.6 |
14.3 |
17.9 |
14.9 |
20.0 |
24.3 |
||
Ave. 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 |
3.40 |
4.05 |
EPS - normalised fully diluted (€) |
|
|
1.79 |
1.99 |
2.37 |
3.04 |
2.48 |
3.29 |
3.92 |
EPS - (GAAP) (€) |
|
|
1.80 |
2.04 |
2.44 |
3.04 |
2.53 |
3.37 |
4.01 |
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 |
19.2 |
19.9 |
||
Normalised Operating Margin (%) |
12.3 |
12.5 |
12.6 |
13.6 |
10.2 |
12.4 |
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 |
110.3 |
128.4 |
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 |
52.8 |
60.9 |
||
Cash |
21.4 |
40.4 |
35.0 |
42.9 |
48.8 |
56.1 |
65.9 |
||
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) |
(52.7) |
(56.3) |
Creditors |
(34.3) |
(38.7) |
(44.7) |
(45.6) |
(49.8) |
(52.7) |
(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 |
125.3 |
145.4 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
20.3 |
24.4 |
28.8 |
22.9 |
36.4 |
36.1 |
41.8 |
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) |
(6.3) |
(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 |
9.4 |
11.9 |
||
Opening net debt/(cash) |
|
|
(16.6) |
(21.0) |
(30.3) |
(38.6) |
(32.6) |
(42.7) |
(52.0) |
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) |
(52.0) |
(63.9) |
Source: Esker, Edison Investment Research
|
|
Research: Healthcare
Basilea has bagged a multi-year agreement with the Biomedical Advanced Research and Development Authority (BARDA), potentially worth US$268m, to advance its anti-infectives franchise. The Other Transaction Agreement (OTA) will include an initial payment of US$29m to support clinical development work for fosmanogepix and BAL2062 as they prepare to enter the next phase of clinical development. The agreement will last up to 12 years and management expects it to cover 60% of its development costs related to the covered programmes over the period. These expected inflows have triggered another guidance upgrade for FY24 (revenue of CHF203m, from CHF196m previously) with a significant uptick in the bottom line on increased deferred taxes (net profit guided to be CHF60m vs CHF42m previously). We have adjusted our estimates to reflect the potential non-dilutive funding from BARDA, with our valuation increasing to CHF95.3/share, from CHF89.7/share previously.