Last close As at 05/08/2026
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Research: TMT
Esker’s Q1 revenue update confirmed that despite a small reduction in documents processed due to the COVID-19 disruption, revenues grew 17% y-o-y, with cloud-related revenues up 21% y-o-y. Management maintained its outlook for c 10% revenue growth in FY20 and highlighted that the crisis is bringing into focus the benefits of automating back-office processes. We maintain our forecasts, which were recently revised to take account of COVID-19 restrictions.
Esker |
Strong Q1 growth; FY20 outlook maintained |
Q1 revenue update |
Software & comp services |
16 April 2020 |
Share price performance
Business description
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Esker is a research client of Edison Investment Research Limited |
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Esker’s Q1 revenue update confirmed that despite a small reduction in documents processed due to the COVID-19 disruption, revenues grew 17% y-o-y, with cloud-related revenues up 21% y-o-y. Management maintained its outlook for c 10% revenue growth in FY20 and highlighted that the crisis is bringing into focus the benefits of automating back-office processes. We maintain our forecasts, which were recently revised to take account of COVID-19 restrictions.
Year end |
Revenue (€m) |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
12/18 |
86.9 |
12.2 |
1.64 |
0.41 |
59.8 |
0.4 |
12/19 |
104.2 |
13.6 |
1.76 |
0.45 |
55.7 |
0.5 |
12/20e |
114.8 |
14.7 |
1.73 |
0.50 |
56.6 |
0.5 |
12/21e |
132.9 |
17.9 |
2.07 |
0.55 |
47.2 |
0.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q1 revenues +17% y-o-y; limited COVID-19 impact
Q120 revenues of €28.2m were 17% higher y-o-y (16% in constant currency); cloud-based revenues grew 21% (constant currency) to make up 92% of Q1 revenues. As has been the trend for some time, legacy and on-premise revenues combined declined 22% y-o-y. Cloud revenues benefited from 30% y-o-y growth in the US (36% of cloud revenues) and 50% growth in Asia Pacific. While Consulting revenues were 27% higher y-o-y, the company noted that transaction-related revenues, which make up 45% of group revenues (ie documents processed), were affected by the COVID-19 restrictions – management estimates this reduced March growth by c 2.7pp.
Maintaining double-digit growth outlook for FY20
With its FY19 results in March, Esker updated its guidance to take account of COVID-19 disruption. The company noted the value of signed projects plus those in the process of implementation represent more than four months of activity. Despite a lengthening of the sales cycle and potentially lower volumes processed through the platform (partially mitigated by the diverse customer base), the company continues to expect double-digit revenue growth for FY20, with profitability similar to FY19. This assumes Esker continues to invest for future growth.
Valuation: Recurring revenues provide support
The stock has rebounded 20% from the low of €82 in mid-March, ahead of the 15% growth in the Euronext Growth index over the same period. While the stock continues to trade at a premium to document automation software and French software peers on EV/sales and P/E multiples, it is trading more in line with US SaaS software companies, which likewise have high recurring revenues, high growth and web-based delivery.
Exhibit 1: Financial summary
€'000s |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
65,990 |
76,064 |
86,871 |
104,174 |
114,759 |
132,944 |
EBITDA |
|
|
14,871 |
16,399 |
18,237 |
20,011 |
21,974 |
25,878 |
Operating Profit (before amort and except) |
|
|
9,934 |
10,547 |
11,913 |
12,762 |
14,018 |
17,222 |
Amortisation of acquired intangibles |
(200) |
(300) |
(344) |
(344) |
(344) |
(344) |
||
Exceptionals and other income |
(474) |
(456) |
(88) |
(62) |
0 |
0 |
||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
9,260 |
9,791 |
11,481 |
12,356 |
13,674 |
16,878 |
||
Net Interest |
(108) |
(110) |
(57) |
268 |
100 |
100 |
||
Profit Before Tax (norm) |
|
|
9,949 |
10,669 |
12,173 |
13,553 |
14,718 |
17,922 |
Profit Before Tax (FRS 3) |
|
|
9,275 |
9,913 |
11,741 |
13,147 |
14,374 |
17,578 |
Tax |
(2,950) |
(3,148) |
(2,940) |
(3,402) |
(4,456) |
(5,449) |
||
Profit After Tax (norm) |
6,785 |
7,281 |
9,125 |
10,046 |
10,156 |
12,366 |
||
Profit After Tax (FRS 3) |
6,325 |
6,765 |
8,801 |
9,745 |
9,918 |
12,129 |
||
Ave. Number of Shares Outstanding (m) |
5.3 |
5.3 |
5.4 |
5.5 |
5.7 |
5.8 |
||
EPS - normalised (c) |
|
|
128 |
138 |
169 |
182 |
179 |
215 |
EPS - normalised fully diluted (c) |
|
|
122 |
132 |
164 |
176 |
173 |
207 |
EPS - (GAAP) (c) |
|
|
120 |
128 |
164 |
180 |
175 |
210 |
Dividend per share (c) |
30 |
32 |
41 |
45 |
50 |
55 |
||
Gross margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
22.5 |
21.6 |
21.0 |
19.2 |
19.1 |
19.5 |
||
Operating Margin (before GW and except) (%) |
15.1 |
13.9 |
13.7 |
12.3 |
12.2 |
13.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
28,324 |
37,912 |
39,635 |
47,201 |
48,601 |
49,501 |
Intangible Assets |
22,381 |
26,673 |
28,096 |
29,323 |
30,823 |
32,023 |
||
Tangible Assets |
5,158 |
7,115 |
7,050 |
10,434 |
10,334 |
10,034 |
||
Other |
785 |
4,124 |
4,489 |
7,444 |
7,444 |
7,444 |
||
Current Assets |
|
|
42,024 |
42,823 |
49,016 |
52,022 |
62,855 |
71,193 |
Stocks |
101 |
176 |
147 |
185 |
185 |
185 |
||
Debtors |
19,523 |
21,253 |
25,551 |
30,015 |
32,070 |
37,151 |
||
Cash |
21,338 |
20,632 |
22,794 |
21,357 |
30,135 |
33,392 |
||
Other |
1,062 |
762 |
524 |
465 |
465 |
465 |
||
Current Liabilities |
|
|
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(36,168) |
(39,376) |
Creditors |
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(36,168) |
(39,376) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(7,657) |
(14,909) |
(10,810) |
(8,276) |
(5,776) |
(3,276) |
Long term borrowings |
(7,657) |
(13,716) |
(9,318) |
(6,516) |
(4,016) |
(1,516) |
||
Other long term liabilities |
0 |
(1,193) |
(1,492) |
(1,760) |
(1,760) |
(1,760) |
||
Net Assets |
|
|
34,392 |
39,620 |
47,769 |
56,647 |
69,512 |
78,042 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
15,944 |
17,311 |
18,324 |
20,290 |
21,787 |
24,005 |
Net Interest |
(127) |
(75) |
63 |
352 |
100 |
100 |
||
Tax |
(1,456) |
(2,053) |
(2,795) |
(3,329) |
(4,456) |
(5,449) |
||
Capex |
(7,021) |
(9,304) |
(7,789) |
(10,958) |
(9,700) |
(9,900) |
||
Acquisitions/disposals |
(935) |
(7,551) |
(225) |
(523) |
0 |
0 |
||
Financing |
467 |
(345) |
785 |
1,449 |
0 |
0 |
||
Dividends |
(1,550) |
(1,633) |
(1,756) |
(2,237) |
(2,653) |
(2,999) |
||
Net Cash Flow |
5,322 |
(3,650) |
6,607 |
5,044 |
5,078 |
5,757 |
||
Opening net debt/(cash) |
|
|
(8,978) |
(13,681) |
(10,016) |
(16,576) |
(21,041) |
(26,119) |
HP finance leases initiated |
(645) |
0 |
0 |
0 |
0 |
0 |
||
Other |
26 |
(15) |
(48) |
(579) |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
(13,681) |
(10,016) |
(16,576) |
(21,041) |
(26,119) |
(31,876) |
Source: Esker, Edison Investment Research
|
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Research: Investment Companies
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