Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
EQS remains in the frustrating position of having a strong commercial proposition in digital whistleblowing still awaiting the impetus of full legislative implementation in its home market of Germany. The timing of this boost remains uncertain, so some caution is built into current year guidance, which is predicated on the law coming into full force in Q323. Financial results will therefore be weighted to H223. The strategy remains sound, in our view, in establishing a much wider pool of customers for cross- and up-selling of other corporate compliance cloud-based services. Upcoming EU regulation on ESG monitoring and reporting should provide substantial further opportunities. Despite the delays, the shares continue to trade well below the level indicated by our DCF.
EQS Group |
Strong positioning beset by further delays |
FY22 results |
Software |
4 April 2023 |
Share price performance
Business description
Next events
Analyst
EQS Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
EQS remains in the frustrating position of having a strong commercial proposition in digital whistleblowing still awaiting the impetus of full legislative implementation in its home market of Germany. The timing of this boost remains uncertain, so some caution is built into current year guidance, which is predicated on the law coming into full force in Q323. Financial results will therefore be weighted to H223. The strategy remains sound, in our view, in establishing a much wider pool of customers for cross- and up-selling of other corporate compliance cloud-based services. Upcoming EU regulation on ESG monitoring and reporting should provide substantial further opportunities. Despite the delays, the shares continue to trade well below the level indicated by our DCF.
Year end |
Revenue |
EBITDA |
PBT* |
EPS* |
EV/EBITDA |
P/E |
12/21 |
50.2 |
1.7 |
(5.4) |
(0.65) |
148.1 |
N/A |
12/22 |
61.4 |
4.6 |
(3.1) |
(0.20) |
56.5 |
N/A |
12/23e |
71.5 |
9.1 |
0.6 |
0.04 |
28.4 |
619.7 |
12/24e |
88.8 |
16.2 |
8.2 |
0.55 |
16.0 |
41.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Benefits of growth more obvious in FY24e
FY22 results were as outlined in February, with revenue up 22% and EBITDA of €4.6m. We reduced our revenue and EBITDA forecasts at that time and have now made very modest adjustments. Management guidance is for FY23 revenues of €71–74m, with EBITDA of €9–11m, based on management’s assumptions of gaining 2–3k new SaaS customers, from the 1k recruited in FY22 (year-end total of over 5k). On our modelling, this lifts the EBITDA margin from 7.4% in FY22 to 12.7% in FY23. We anticipate further good progress in FY24, with a 24% y-o-y increase in revenues delivering a 78% y-o-y uplift in EBITDA, driven by the increased uptake in the scalable cloud-based Compliance solutions, particularly of EQS’s Compliance COCKPIT. New areas, such as monitoring of supply chain risk, should provide a bridgehead into wider ESG monitoring and reporting solutions.
Leverage comfortable
End FY22 net debt was €28.4m (€24.6m excluding leases), down from €74.4m at end FY21, primarily reflecting the capital raise in the early part of the year and subsequent debt repayment and restructuring. Our modelling suggests a modest uptick in net debt at end FY23 (although the extent will depend on the timing of the expected uplift in demand following the legislation), with the following year seeing a strengthening of the balance sheet. Leverage, in our view, remains comfortable.
Valuation: DCF continues to indicate upside
Given the current low level of profitability, traditional valuation multiples remain unhelpful. We are therefore using a DCF, with a weighted average cost of capital of 9% and terminal growth of 2% (unchanged), which now derives a value of €34.82 per share (February 2023: €32.96), well above the current market price.
Cloud-based products drive the top line
Performance from the Investor Relations segment reflected the challenging capital market environment, itself reflecting the war in Ukraine and the inflationary backdrop. Nevertheless, careful control of costs helped the segment deliver a small profit at the EBITDA level as its sales balance shifted more towards the cloud-based IR COCKPIT. We anticipate that this trend in relative weighting will continue in the current year and in FY24, with the margins benefiting from the leverage of the utilisation of the existing tech stack.
For the Compliance segment, FY22 results include the benefit of earlier acquisitions, particularly Got Ethics, which had a base effect of €6.0m of revenue. The question mark for the FY23 outturn remains over the timing on the impetus from the whistleblowing laws coming into full effect in Germany, but this is clearly the main potential revenue driver across the next 18 months to two years. There are already substantial numbers of new customers coming on board for this in other countries such as France, Italy and Spain, which are further down the track.
Exhibit 1: Summary revenue and forecasts by segment
€000s |
FY20 |
FY21 |
FY22 |
FY23e |
FY24e |
Investor Relations |
|||||
Cloud-products |
7,849 |
9,504 |
10,101 |
11,616 |
13,068 |
growth (%) |
48% |
21% |
6% |
15% |
13% |
Service-products |
9,818 |
10,012 |
9,015 |
9,465 |
9,844 |
growth (%) |
13% |
2% |
-10% |
5% |
4% |
Total Investor Relations |
17,667 |
19,516 |
19,115 |
21,081 |
22,912 |
growth (%) |
10% |
10% |
-2% |
10% |
9% |
EBITDA |
(453) |
(1,459) |
148 |
966 |
1,492 |
EBITDA margin |
(2.6%) |
(7.5%) |
0.8% |
4.6% |
6.5% |
Compliance |
|||||
Cloud-products |
10,696 |
19,826 |
30,340 |
35,450 |
48,744 |
growth (%) |
15% |
85% |
53% |
17% |
38% |
Service-products |
9,273 |
10,881 |
11,975 |
14,969 |
17,123 |
growth (%) |
9% |
17% |
10% |
25% |
14% |
Total Compliance |
19,969 |
30,707 |
42,315 |
50,419 |
65,867 |
growth (%) |
4% |
54% |
38% |
19% |
31% |
EBITDA |
5,213 |
3,201 |
4,419 |
8,134 |
14,673 |
EBITDA margin |
26.1% |
10.4% |
10.4% |
16.1% |
22.3% |
Group Revenue |
37,636 |
50,223 |
61,430 |
71,500 |
88,779 |
growth |
6% |
33% |
22% |
16% |
24% |
like-for-like growth |
18% |
14% |
9% |
||
Group EBITDA |
4,760 |
1,742 |
4,567 |
9,100 |
16,165 |
Group EBITDA margin |
12.6% |
3.5% |
7.4% |
12.7% |
18.2% |
Source: EQS Group accounts, Edison Investment Research
As described in our February note, management had previously steered towards a medium-term growth target of €130m of revenues, delivering an EBITDA margin of 30%, which was pencilled in for FY25. This horizon was pushed out 12–18 months (thus now to FY26–27), which remains compatible with our modelling.
Opportunities opening in ESG reporting
On 5 January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) came into force, modernising and strengthening the reporting rules on social and environmental information. The remit is extended to a broader set of approximately 50k large companies, as well as listed SMEs, which are now required to report on sustainability. The new rules will need to be applied by the initial cohort for FY24 (ie reporting in 2025). Companies will need to collect data on environmental impact, diversity and business ethics, as defined in the EU taxonomy for sustainable business activities, and report them in a standardised format, so that they can then be compiled automatically onto a national register.
EQS’s COCKPIT-based solutions to these new reporting requirements are based on the existing tech stack, so the additional investment requirement is limited. Group capital spend is likely to be at a similar level to FY22, although we have built a small contingency into our modelling here.
The whistleblowing opportunity should open up the potential to cross- and up-sell the Compliance COCKPIT. The ESG reporting COCKPIT presents a further opportunity to extend the reach.
Valuation
Given the scale of the transition to take advantage of the whistleblowing opportunity, and the additional costs being borne to achieve it, earnings multiples and comparison to global peers are not particularly helpful at present. For illustrative purposes, we calculate that on FY23 and FY24 EV/sales, the group’s valuation is sitting at around par to global application software peers.
We therefore continue to favour a discounted cash flow (DCF) approach. Using a weighted average cost of capital (WACC) of 9.0% and a terminal growth rate of 2% (unchanged), a DCF generates a share price of €34.82 (up from €32.96 at the time of our February update), 52% above the current level.
Exhibit 2: Valuation at varying WACC and terminal growth rates
Terminal growth rate |
||||||
€/share |
0.00% |
1.00% |
2.00% |
3.00% |
4.00% |
|
WACC |
11.00% |
22.63 |
23.97 |
25.61 |
27.66 |
30.30 |
10.50% |
24.05 |
25.59 |
27.49 |
29.90 |
33.05 |
|
10.00% |
25.62 |
27.40 |
29.61 |
32.47 |
36.27 |
|
9.50% |
27.37 |
29.43 |
32.04 |
35.45 |
40.10 |
|
9.00% |
29.33 |
31.73 |
34.82 |
38.94 |
44.71 |
|
8.50% |
31.54 |
34.36 |
38.06 |
43.09 |
50.37 |
|
8.00% |
34.04 |
37.39 |
41.85 |
48.10 |
57.48 |
|
7.50% |
36.89 |
40.90 |
46.36 |
54.25 |
66.65 |
|
7.00% |
40.18 |
45.02 |
51.80 |
61.97 |
78.92 |
|
6.50% |
43.99 |
49.92 |
58.48 |
71.93 |
96.15 |
|
Source: Edison Investment Research
Exhibit 3: Financial summary
€'000s |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
37,636 |
50,223 |
61,430 |
71,500 |
88,779 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
37,636 |
50,223 |
61,430 |
71,500 |
88,779 |
||
EBITDA |
|
|
4,760 |
1,742 |
4,567 |
9,100 |
16,165 |
Operating profit (before amort. and excepts.) |
|
|
819 |
(3,975) |
(1,327) |
3,131 |
10,146 |
Amortisation of acquired intangibles |
(656) |
(1,532) |
(2,257) |
(2,257) |
(2,257) |
||
Exceptionals |
0 |
110 |
0 |
0 |
0 |
||
Share-based payments |
0 |
0 |
0 |
0 |
0 |
||
Reported operating profit |
163 |
(5,397) |
(3,584) |
874 |
7,889 |
||
Net Interest |
(396) |
(1,461) |
(1,761) |
(2,578) |
(1,931) |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
1 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
423 |
(5,436) |
(3,087) |
553 |
8,214 |
Profit Before Tax (reported) |
|
|
(233) |
(6,858) |
(5,344) |
(1,704) |
5,957 |
Reported tax |
(599) |
229 |
2,013 |
562 |
(1,966) |
||
Profit After Tax (norm) |
296 |
(5,254) |
(1,924) |
370 |
5,504 |
||
Profit After Tax (reported) |
(832) |
(6,629) |
(3,332) |
(1,142) |
3,991 |
||
Minority interests |
(34) |
0 |
1 |
4 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
296 |
(5,254) |
(1,924) |
370 |
5,504 |
||
Net income (reported) |
(866) |
(6,629) |
(3,331) |
(1,137) |
3,991 |
||
Average Number of Shares Outstanding (m) |
7.2 |
8.1 |
9.7 |
10.0 |
10.0 |
||
EPS - normalised (€) |
|
|
0.04 |
(0.65) |
(0.20) |
0.04 |
0.55 |
EPS - normalised fully diluted (€) |
|
|
0.04 |
(0.65) |
(0.20) |
0.04 |
0.55 |
EPS - basic reported (€) |
|
|
(0.12) |
(0.81) |
(0.34) |
(0.11) |
0.40 |
Dividend per share (c) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
6.4 |
33.4 |
22.3 |
16.4 |
24.2 |
||
EBITDA Margin (%) |
12.6 |
3.5 |
7.4 |
12.7 |
18.2 |
||
Normalised Operating Margin (%) |
2.2 |
(7.9) |
(2.2) |
4.4 |
11.4 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
39,007 |
168,468 |
170,440 |
172,790 |
171,100 |
Intangible Assets |
31,016 |
160,386 |
158,081 |
158,563 |
157,123 |
||
Tangible Assets |
7,216 |
7,351 |
5,011 |
6,878 |
6,628 |
||
Investments & other |
775 |
731 |
7,349 |
7,349 |
7,349 |
||
Current Assets |
|
|
17,086 |
18,369 |
18,932 |
15,269 |
15,595 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
3,923 |
7,018 |
6,075 |
7,052 |
8,756 |
||
Cash & cash equivalents |
12,074 |
8,653 |
10,654 |
6,014 |
4,636 |
||
Other |
1,089 |
2,697 |
2,203 |
2,203 |
2,203 |
||
Current Liabilities |
|
|
(12,381) |
(89,171) |
(27,066) |
(30,147) |
(30,790) |
Creditors |
(2,747) |
(3,197) |
(2,709) |
(3,027) |
(3,486) |
||
Tax and social security |
(56) |
(214) |
(1,350) |
(1,571) |
(1,951) |
||
Short term borrowings (includes lease debt) |
(3,278) |
(73,095) |
(8,198) |
(8,198) |
(8,198) |
||
Other |
(6,300) |
(12,665) |
(14,809) |
(17,350) |
(17,155) |
||
Long Term Liabilities |
|
|
(10,768) |
(27,426) |
(50,096) |
(47,096) |
(41,096) |
Long term borrowings (includes lease debt) |
(7,641) |
(9,927) |
(30,890) |
(27,890) |
(21,890) |
||
Other long term liabilities |
(3,127) |
(17,499) |
(19,206) |
(19,206) |
(19,206) |
||
Net Assets |
|
|
32,943 |
70,240 |
112,210 |
110,817 |
114,809 |
Minority interests |
0 |
0 |
1 |
1 |
1 |
||
Shareholders' equity |
|
|
32,943 |
70,240 |
112,210 |
110,818 |
114,809 |
|
|||||||
CASH FLOW |
|||||||
Operating Cash Flow |
3,765 |
(2,296) |
2,786 |
5,065 |
10,248 |
||
Working capital |
1,294 |
(1,149) |
3,952 |
(659) |
(1,246) |
||
Exceptional & other |
1,037 |
5,711 |
699 |
2,069 |
3,951 |
||
Tax |
(154) |
(229) |
(2,013) |
562 |
(1,966) |
||
Net Operating Cash Flow |
|
|
5,942 |
2,037 |
5,425 |
7,038 |
10,988 |
Capex |
(2,008) |
(3,149) |
(2,813) |
(3,250) |
(3,250) |
||
Acquisitions/disposals |
0 |
(96,428) |
(14) |
(2,310) |
0 |
||
Net interest |
(157) |
(1,636) |
(1,666) |
0 |
0 |
||
Equity financing |
9,124 |
43,929 |
44,833 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
414 |
(2,772) |
(2,327) |
(3,117) |
(3,117) |
||
Net Cash Flow |
13,315 |
(58,019) |
43,438 |
(1,639) |
4,621 |
||
Opening net debt/(cash) |
|
|
13,472 |
(1,153) |
74,372 |
28,434 |
30,075 |
FX |
(199) |
126 |
50 |
0 |
0 |
||
Other non-cash movements |
1,509 |
(17,631) |
2,450 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,153) |
74,372 |
28,434 |
30,075 |
25,455 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
OpGen has announced the achievement of two interim milestones as part of its research project (PREPLEX) in collaboration with InfectoGnostics (a research campus for diagnosis of infectious diseases and pathogens) under Jena University, Germany. The initial joint R&D project, announced in September 2020, aims to develop AI-based assay for phenotypic carbapenemase resistance in Gram-negative bacteria. Completion of the interim milestones is related to the identification of novel markers for phenotypic carbapenemase resistance in Klebsiella pneumoniae and Pseudomonas aeruginosa (two pathogens on the World Health Organization’s list of concern), which was further validated by the OpGen’s ARESdb database. This encouraging development presents the opportunity for a potential expansion of the project. Given the company’s current focus on building AI models to predict antibiotic susceptibility, we believe this development provides further momentum to OpGen’s plans.