As previously reported, Esker saw 20% revenue growth in FY19 (18% in constant currency), with 21% constant currency growth in SaaS-related revenues and 80% recurring revenues. Higher than expected investment in headcount to support customers and channel partners and drive new business resulted in normalised operating profit and EPS below our forecast. The value of committed contracts increased 47% y-o-y – these contracts will contribute to revenues over the next three years. Net cash at year-end increased 27% y-o-y to €21m.

The majority of the business is working remotely with no disruption to service. Volumes processed by the platform had not been affected by COVID-19 restrictions as at the reporting date, but we expect there could be some weakness over the coming quarter or two. Esker may see some delay in winning new business and consulting work over the next two quarters but continues to expect double-digit revenue growth in FY20. We have revised our forecasts to reflect slower revenue growth in FY20, although we still expect growth of 10%. We have cut FY20 revenue by 4.5% and EPS by 21.4%. We forecast revenue growth of 15.8% and EPS growth of 19.7% in FY21. 

The stock is down 19% from its peak in February. While it 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.