Esker has seen revenue growth accelerate through the course of 2019. Group revenues grew 18% y-o-y in Q3 on a constant currency basis while cloud-based revenues grew 22% over the same period. The company has maintained its full year revenue guidance, which we view as conservative. We maintain our estimates, but highlight that risk is weighted to the upside.
Revenue growth accelerated in Q3, with Esker reporting 21% year-on-year growth in revenues to €25.4m. In constant currency, revenues grew 18%, up from 14% in Q1 and 16% in Q2. Revenues for 9M19 of €75.5m were 19% higher year-on-year and 16% higher on a constant currency basis. Cloud-based revenues (SaaS and consulting) made up more than 90% of Q3 revenues, growing 25% y-o-y and 22% in constant currency (up from 17% in Q1 and 21% in Q2). Surprisingly, legacy product sales grew 21% y-o-y in constant currency in Q3 and 13% for 9M19. Net cash at the end of Q3 increased to €19m from €15m at the end of H1.
Management continues to expect to achieve revenues of at least €100m in FY19. Based on revenues reported to date, this would require revenue of at least €24.5m in Q4, which should be achievable considering the performance in Q3 and the strength of the dollar versus the euro. We maintain our forecasts but highlight that risk is to the upside.
Esker’s stock has gained 39% year-to-date and trades at a premium to French small-cap software peers and global DPA software providers. Compared to companies with a similar SaaS business model, however, Esker trades at a discount on all multiples. As the company accelerates revenue growth towards its 20% target, we would expect the shares to re-rate. We note that Esker has a strong balance sheet with €19m net cash at the end of Q319, representing ample funds to support growth via internal investment or selective M&A.