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We see this announcement as a major strategic positive for Eckoh, which strengthens its position as a leading provider of contact centre security solutions. In our view, Eckoh’s current trading multiple of 8.4x CY24E EV/EBITDA has yet to fully reflect the unique and evolving long-term growth opportunities. We reiterate our Buy rating and 60p TP.
Eckoh plc
Eckoh has provided an excellent new business update. In H1’Sep24, Eckoh contracted a record level of business totalling £24.6m. This momentum has continued with a further c.£20m+ of business contracted (defined as both new wins, renewals, and up/cross sells) in H2 to date. This has led to a record total contracted business of £45m signed by the end of January, of which c.£18m is new business. This is an impressive result driven by the signing of several sizable enterprise deals in North America, as well as a notable 3-year, £2.3m contract with a large UK-based media and telco provider. These contracts are expected to be implemented in H1’25 and provide confidence in what we forecast to be a record revenue and profit performance in FY25. We reiterate our Buy rating.
Eckoh’s FY24 can be split in two, with the first half about successful renewals driving large total contract value (TCV) signed, but the second half particularly about excellent new business generation, more than doubling H1 (c.£12m in H2, with part of Q4 left to go, versus c.£6m in H1). The H2 performance has potential to be better still by some magnitude, with the sales pipeline healthy, but contract signature timing ahead of year-end uncertain. Putting this in context, FY24E new business TCV is already substantially ahead of last year (c.£18m vs c.£14.4m) and will likely end up the best performance for at least five years. Notably, the four large US contracts referenced in the statement are all new customers. Implementation timescales mean US ARR will step-up at the FY25 interim period end, but this should be meaningful when it happens. Meanwhile, the UK contract signed is welcome and of a relatively unusual size, tending to support an FY25E outlook for single digit UK revenue growth versus our flat expectation. We leave forecasts unchanged for now, seeing performance as underpinning the step-up to double digit revenue growth implied in FY25E forecasts. FY24E is affected by one-off contract churn in the UK, masking a lot of underlying progress with product strategy and go-to-market function, but this should show through much better at a group level in FY25. From FY25 onwards the revenue mix also starts to really play in the group’s favour, with the US >50% of revenue but >50% of the US base also on cloud contracts, while gross / EBIT margins should keep ticking up. Eckoh looks great value to us here; applying management’s aspiration of working capital neutrality in FY25 (versus our assumed outflow) broadly implies high single-digit FCF yield and mid-teens cash-adjusted PE.
Eckoh has made strong progress in H1’24 with 22% N. America Data Security Solutions ARR growth and a record pipeline, although this is not yet reflected at a Group level. A 4% yoy decline in total revenues to £18.8m, masks the progress made in the important N. America market where revenues grew 5% yoy (+$0.6m) and recurring revenues +18% yoy (+$1.4m). The delta between this impressive growth in recurring revenues and a decline in total revenues is the absence of hardware revenues in contract renewals (due to cloud transition), and the loss of two non-security UK customers (only c.9% of UK&I+RoW revenues are non-security). Eckoh has 83% of revenue as recurring, has increased adj EBIT margins by 50% over the past four years (H1’24: 21.4%), and a record N. America pipeline underpins future revenue growth. Looking ahead, a return to flat/modest UK growth, combined with impressive US growth holds plenty of appeal, particularly given the associated improvement in margins and quality of earnings.
H1 recurring revenue and gross profit are resilient, with the US growing (+22% data security ARR yoy) while the UK fell slightly due to two non-core client losses, one of which now drops out as a headwind from H2 onward. TCV performance in the US is strong overall (+50% yoy), driven by excellent renewals biased to multi-year contracts, more than offsetting a fall in data security new contracted business, as sales cycles elongated. Margin performance is healthy with gross margins at a new high of c.83%, due to mix shift to cloud, which we see as sustainable. Underlying EBIT growth is high teens, with c.£1m of further cost benefit in FY25E to come from rationalising legacy IVR development in the UK, which drives a FY24E exceptional of c.£1.2m. With >90% UK revenues now core data security, and the small rump of legacy revenues well spread, this looks sensible. With FY24E EBIT and net cash numbers looking fine based on the H1 out-turn, the focus shifts towards strong execution to drive run-rate US momentum in H2, that then supports acceleration in FY25E. Here we see several encouraging trends including i) reflecting excellent US sales pipeline, a number of large deals (we infer >$1m each) to potentially close in H2, inflecting new contracted business sharply upwards, ii) PCI-DSS v4.0 as a supportive tailwind. From April 2024 the number of new requirements increases sixty-fold and updates seventy-fold; many enterprises performing own-audits will fall out of compliance, hence reliance on Eckoh to provide compliance should increase, iii) high levels of interest building in secure call recording within the existing customer base. We retain our Buy and TP on unchanged rev / EBIT / EPS forecasts, still seeing Eckoh as an undervalued category winner in data security.
Eckoh has provided a H1 trading update with a record performance in Total Contract Value won (+40% yoy) and a record new business pipeline in North America with multiple contracts where Eckoh is the selected vendor, but due to a lengthening in sales cycles, these sizable contracts are now expected to land in H2. North American growth is key to the Eckoh investment case and H1’24 ARR increased 22% yoy to $16.8m. Eckoh’s new products (e.g. Secure Call Recording) have been well received and are expected to go live with several clients in H2. Eckoh is ‘right-sized’ and margin expansion has been a consistent theme with a 3.9pp yoy increase in H1’24 adj EBIT margins to c.21.8%. Eckoh is experiencing record levels of demand from new and existing customers, validating the enlargement of its Customer Engagement Security product suite and leaving the business well placed for future revenue growth in FY25 and beyond.
H1 has seen a record order performance, up 40% year-on-year, with US sales pipeline at highest-ever levels entering H2, including some highly-advanced contracts where Eckoh is selected vendor. We would expect the order number to be biased to renewals, but the US trend of more multi-year contracts instead of 12 month “auto-renewal” contracts, speaks to customer satisfaction with service and product strategy. H1 profit performance has been strong, with high-teens yoy growth when stripping out c.£0.8m net currency tailwind effect, reflecting good cost base control. H2 should be better than H1, hence our assumed 50:50 H1:H2 split as it stands looks conservative. Similarly, H1 net cash generation (+£1.6m) leaves FY (+£0.5m H2 required) looking conservative. Underlying recurring revenue growth for H1 is implicitly high single digit year on year, but the loss of a non-security UK contract (c.£1m H1/23) means H1 recurring revenue progress is masked (c.£15.6m vs £15.4m) at a headline level. With the contract loss having occurred very early in H2 last year, any headwind effectively now drops out of numbers from H2/24 onward. H1 headline revenue is down c.4% driven by the contract loss, transition to cloud leading to non-recurring revenue dropping away (explained in detail in our initiation here), and some elongation in sales cycles. We cut FY24E revenue (£42.5m to £38.6m) to assume only modest improvement (+£1m) in H2-on-H1 revenue, mainly driven by H1 contracts signed reaching run-rate. However, due to margin over-delivery / strong H1 profit performance, our EBITDA / EBIT and cashflow forecasts are kept unchanged. We retain our Buy and TP, seeing Eckoh as a category winner in secure payments, with forecast upside potential for profits / EPS / cash, and an outlook for accelerating growth in H2/24 and beyond.
We believe the market will weigh a modest shortfall in revenue with unchanged profitability, a strong cash position and an improving business model. As such, we remain Buy rated with a 12-month TP of 60p. Eckoh currently trades at c.11x CY24E EV/EBITDA and a 6% FCF yield.
FY23 was another material step forward for Eckoh in the key North American market (c.48% of TAM). Group revenues increased 22%, while North American ARR increased 34% organically, evidence of accelerating growth in ECK’s recurring revenue products. FY23 results are consistent with Eckoh’s April trading update with revenues broadly in-line, profit outperforming (c.80bps AOP margin beat) and Net Cash c.£0.3m higher at £5.7m. Eckoh has refreshed its go-to market strategy and enlarged its product suite, this has unlocked a larger TAM and could more than double customer value with existing clients. We reiterate our Buy.
With the results in line with the trading update, our TP is unchanged at 60p, and we maintain our Buy rating. While 11x 2024E EV/EBITDA is undemanding in our view, we believe any strong re-rating of the shares is contingent on consistent delivery of organic revenue growth.
FY23 results are marginally ahead of expectations set at the trading update stage on all key metrics, i.e. revenue, EBIT, CFFO and net cash, and c.11% ahead of EPS due to a succession of small beats on interest / tax / SII, which we see as a case of good expectations management. The new financial year has started well with c.£7m of orders won, a mixture of two large renewals and strong new business performance, with the late-stage pipe remaining in excellent shape. We leave forecasts unchanged for now as we only initiated recently (see here), but view the FY23 out-turn as leaving FY24E more comfortable than before, particularly on EPS. The US is performing excellently, with secure payments ARR growth of 34% being >20% on an currency-adjusted basis. The recent launch of secure call recording has been well received by new prospects and existing customers, with a concomitant high level of sales activity. The UK grew revenues c.10% but this was c.1%-2% ex-Syntec inclusion, and this is the expectation going forward. Overall, Syntec has performed in line with expectations at time of acquisition. Margins tracked upwards in FY23 and c.19.9% at EBIT level leaves our 19.4% FY24E looking slightly conservative, even allowing for FX moves. A relatively heavy period of renewals has now largely culminated and the financial effects of this are i) CFFO / EBITDA conversion should improve, having already been slightly ahead of plan in FY23, and ii) ARR growth should translate more directly into reported revenue. We retain our view that Eckoh is one of the few “category winners” available in UK smallcap software, with a dominant position in an attractive market niche, and various avenues of accelerating growth both in the US and globally. The shares have bounced somewhat recently, but in our view the rating remains an anomaly for such a strategic asset; we retain our Buy and TP.
Eckoh has provided a strong FY’Mar23 trading update which highlights the significant progress made in North America with N. American Security Solutions exit ARR up 34% organically to $15.9m (FY22: $11.9m). Group Revenues were broadly in-line with our forecasts (£39m vs £40m) but adjusted operating margin outperformed by c.50bps at 19.5%. Net Cash also surprised to the upside at £5.7m (vs SCMe: £5.4m). Looking forward, total contracted business grew >50% which alongside the launch of new products, underpins future ARR growth. An enlarged Customer Engagement Security product suite is key to the investment case as it unlocks a larger TAM and could double customer value (ie ARPU) with existing clients.
Category winner: We like UK enterprise software companies that are “category winners” in their niche, meaning market leadership positions based on IP differentiation that is near-impossible for competitors to replicate. Eckoh fits this definition, with dominant market leadership in a growing customer engagement security niche, and unassailable IP differentiation. Attractive market dynamics: Eckoh’s total addressable market is huge in the core voice security market globally, particularly the US, and is relatively untapped with most contact centres using non-secure or inferior approaches to dealing with customer payments. No major US competitor, remote working and cost-of-living trends along with increasing regulatory requirements and a shift to cloud deployments all help drive adoption for Eckoh as market leader. Excellent cross-sell: While new customer acquisition is strong, Eckoh has developed a family of cross-sell products around secure chat, digital payments, advanced speech recognition, and, latterly, secure call recording, where Eckoh has potential to disrupt a large, mature market with legacy competitors. Collectively, we see potential for cross-sell from these products to more than double TCV from the existing customer base in the long run. FY23 update: This shows a slight beat on profits, EPS and cash versus consensus, with an excellent US ARR performance (+34% y-o-y) demonstrating building business momentum that is an encouraging forward indicator for FY24 reported financials. Valuation: A 9x EBITDA and <15x cash-adjusted PE for a market leader delivering on strategy, with c.80% recurring revenues, c.80% gross margins and long-term track record of profitability and cash generation, looks anomalous. The wider UK smallcap technology sector has been under pressure for some time, but on a relative basis, Eckoh still stands out as materially undervalued. We initiate coverage with Buy and a 50p target price.
Eckoh has announced the launch of a new cloud-based Secure Call Recording (‘SCR’) solution for contact centres. This is a timely launch given market research estimates that c.24% of US contact centres are currently looking to update their call recording solution over the next 12 months. Eckoh unveiled its technology roadmap at a CMD event in October 2022 and the launch of SCR is the next phase given this new product will utilise artificial intelligence to enable real-time monitoring and improvement of an agents performance. This new launch is part of the Group’s strategy to expand its Customer Engagement Security offering through new modules as it targets a doubling of customer value. We believe Eckoh is seriously oversold trading on 9x EV/EBITDA vs the wider UK-listed technology universe average of c.14x.
As the market leader in contact centre security solutions, coupled with the potential to expand into broader secure communication adjacencies, makes Eckoh well positioned in its end market. Trading on 12x CY23E EV/EBITDA, Eckoh’s valuation does not yet fully reflect the unique and evolving long-term growth opportunities, in our view. We initiate coverage with a Buy rating and 60p target price.
The stand out number in Eckoh’s interims is North America Security Solutions ARR of $13.8m which has risen 16% from $11.9m over the past 6 months, implying even stronger double digit annualised growth. H1 also saw record N. Am. new business of $7.1m (PY $3.3m). UK ARR over the same period was broadly flat at £16.4m. Going forward N. America is likely to continue to be the growth driver, both due to native demand for Secure Payments solutions but also as the likely key beneficiary of Eckoh’s Customer Engagement Security strategy and the associated impending product launches. This latter is key to the investment case, opening up a much larger TAM as Eckoh seeks to win new customers and double existing customer value.
H1 has seen a return to strong growth as guided. We highlight end Sept ARR of £27.8m, up 10% over the past 6 months as well as strong revenue growth in the US. Management confirms it is tracking in line with FYMar23 market expectations. We see these expectations solidly underpinned by H1 results, with H1 implied AOP of >£4.0m requiring a touch less in H2 to hit our forecast £7.6m. New product launches are due in the coming months which are set to support Eckoh’s goal of doubling its share of wallet amongst its customer base.
Ahead of its CMD next week, Eckoh announces that H1 order levels are set to be in excess of £17m (PY £11.2m) or over 50% ahead of H122. We believe this is a result of strong organic growth coupled with a contribution from Syntec. As a result Eckoh maintains its guidance for significant revenue and profits growth in FY23 (we forecast 25% yoy growth in FY23 FD adj. EPS). This year has seen very significant announcements regarding Eckoh’s product and technology strategy with the launch of its Customer Engagement Security offering. This marks a major expansion of the product set and the globally addressable markets. We encourage you to attend Eckoh’s CMD on Oct 11th for a comprehensive update on these developments.
The strong trading already flagged in mid-June is continuing with Eckoh now indicating visibility into H123 order levels that are expected to be up “significantly” yoy. Management details two specific large contract wins today, the first a $1.3m win over 2 years with an international hotel group and the second a £0.6m win over 5 years with a global insurer. As per its strategy, Eckoh is winning more and more international deals and this one also stands out for the breadth of functionality being taken. Cross sell of the group’s wide range of solutions is key to Eckoh’s recently announced Customer Engagement Security offering. We encourage you to attend Eckoh’s CMD on Oct 11th for a comprehensive update on this and other product developments.
FY22 headline numbers are in line with the mid-May trading update. Adjusting for the closure of the Support business, group organic revenues grew by approximately 5%, rising to c. 6% c/c. Adj. EBITDA of £6.8m (PY £6.4m) is 3% ahead of our pre-trading update forecasts and AOP of £5.2m (PY £4.7m) 6% ahead. The progression is much stronger than it looks given the closure of Support activities, which contributed £2m in the prior year and just £0.3m in FY22. Eckoh maintains its guidance for a strong recovery in FY23. We forecast organic c/c growth of c. 10%, trimmed by c. 2% given new business order intake was impacted by Q4 macro/geopolitical issues. Our EBITDA forecast is essentially unchanged though FCF has come back as we model more cloud business vs. on prem. Importantly, Eckoh announces a significant new product development today: Customer Engagement Security, which has significant cross-sell potential.
Having updated in April that FY22 revenues and operating profits were expected to be in line with consensus, Eckoh today updates that operating profits grew strongly in the period and will now be ahead of consensus. Revenues are expected to be in line. We suspect this means operating profits will be slightly above £5.0m compared to our forecasts of £4.9m. This de-risks our FY23 forecasts, where we are looking for AOP of £7.7m. We are forecasting FY23 AOP of £5.9m from the existing business, up from just under £5m in FY22, with much of this improvement coming from the £1m cost-cutting programme initiated before and unrelated to the Syntec acquisition. Syntec adds a further £1m, which we believe is prudent given its rapid growth and FYJun21 AOP of £1m. We model a further £0.8m of synergies. The result is FY23 FD adj. EPS growth of c. 40%, which looks attractive in the context of a 20x P/E and a FCF yield of 6.6%.
FYMar22 has come in in line with guidance set back in May 2021. Organic revenue and AOP is therefore comparable to FY21 as the lingering effects of lockdowns and some headwinds from SecPay contracts that including deferred hardware and implementation revenues revert to pure software revenues. We make no changes to our FY23 forecasts which are driven by Eckoh’s May guidance of “material growth” in the in the core business and the consolidation and synergies from the Syntec acquisition. The upshot is forecast FY23 growth of >40% in FD adj. EPS and a P/E of 18.6x. With a market leading SecPay business that saw 29% ARR growth in H1 and has an enormous TAM to mine, we believe Eckoh has become seriously oversold.
Eckoh is acquiring Syntec for £31m, a provider of Secure Payments solutions that bolsters its leading position in US Secure Payments whilst complementing its UK operations. Syntec has a long track record of growth, profitability and FCF generation. It generated revenues of £5.8m in the 12 months to June 2021, up 26% organic yoy, driven especially by strong progress in the US, and an operating profit of £1m. We model synergies of £0.8m in FY23, leading us to upgrade earnings by 15%. We upgrade our price target from 80p to 92p. Buy.
An in line H1 coupled with continued UK recovery since period end, improving activity levels in SecPay, increasing global opportunity and cost savings going forward give Eckoh “significant confidence” in achieving guided flat revenues and profits growth in FYMar22. Guidance for double digit revenues and profits remains for FY23 (no changes to our forecasts). While H1 continued to suffer from CV19-related drag it is encouraging that the UK business was back at pre-pandemic levels by September. In the US, the market opportunity remains enormous. Large deals have been on hold for some time now, though Eckoh still inked a $1.5m record cloud deal in November. Eckoh believes that there is still a market for larger (increasingly global) deals and informs that sales processes have recommenced, though the risk is that these remain lengthy. We introduce a Buy recommendation and 80p PT today.
Eckoh has signed its largest ever global SecPay Cloud contract, worth a minimum of $1.5m over three years with a good likelihood this will be exceeded. This is strong validation of a cloud business that was already growing rapidly, representing 40% of the total US SecPay ARR of $8.9m at the end of Sept and doubling its ARR over 12 months. The customer is a leading global food and drink company and as such this is a flagship win. The US SecPay market represents a significant opportunity for Eckoh and one that we still feel is not reflected in the current value of the company. We can see Eckoh building a $30m revenue business here in a meaningful timeframe, a level that could easily justify the current make capitalisation of £119m even ignoring the highly profitable cash cow UK business.
H1 trading is in line with full year expectations maintained. Underlying UK revenues were up 7% yoy and US SecPay ARR grew 29% yoy. Offsetting this was the intentional wind down of support services (some 10% revenue drag) and FX (some 3% drag). H1 FCF looks to have come in at a healthy c. £2.6m leaving net cash at £12.7m. Alongside encouraging continuing business trends Eckoh points to UK activity levels having gradually improved, reaching pre-pandemic levels in September. Both US SecPay and the UK business were impacted by lockdowns, though both displayed strong resilience. We see both divisions as a recovery play. Bigger picture the opportunity is largest for SecPay and we believe revenues here could reach $30m in a meaningful time frame. That could be worth the whole of the current mkt cap over time
The highlight of FY21 was continued strong growth in US Secpay, with revenues up 57% yoy to $12.8m and now representing >32% of group sales. As such Eckoh contains one of the fastest growing technology businesses in the UK, with the size of this business now very much moving the needle. Eckoh’s Cloud offering (>50% of new contracts by value) and remote SecPay offerings found particular favour in the period, with on premise business having been hindered by lockdowns. We continue to feel that Eckoh’s SecPay business will achieve recurring revenues of over $30m in a meaningful time frame and that the current group market capitalisation does not reflect the value of such a business. The UK business saw sales fall 12% yoy to £18m as the pandemic provoked a reduction of volumes, notably in travel, retail and leisure, but timely cash management helped mitigate the impact of this slowdown. We fully expect the UK business to recover in due course and see Eckoh as an excellent “recovery play”. Indeed Eckoh maintains its guidance for “material growth” in 2023. Our forecasts remain unchanged and we consider any risk to be to the upside.
At the height of the pandemic we pointed to the resilience of Eckoh’s business model. This is fully demonstrated today with FYMar21 AOP expected just above last year’s £4.7m (in line with guidance/forecasts). Pandemic aside (if it’s possible to say that), the performance is all the more remarkable given the exceptional $4m Coral licence in the base, the wind-down of US Support and dollar headwinds. Star of the show was US SecPay, where we believe revenues grew 60% yoy to c.$13m (33%/sales). We note also the decisive bounce back in US Sec Pay new business in H2. Today Eckoh guides to “comparable sales and profit“ in FY22, before “material growth“ in FY23, exactly as we would have expected as global economies reopen. For FY23 we model 15% sales growth (driven by 40% growth from US SecPay) with FCF broadly doubling to £6.5m. Furthermore, we are quite comfortable that US SecPay sales could grow to >$30m in a meaningful time frame as Eckoh continues to execute on this huge and underpenetrated market. Having impressively navigated the crisis we believe Eckoh represents one of the most attractive reopening plays in the sector… and that is exactly what we are looking for.
US SecPay momentum returns decisively. After just $2.3m of new US Secure Payments contracts signed in the difficult 5 months to end Aug, ECK has since signed a further $9.3m, bringing the year’s total to $11.6m (PY $10.7m), comprised of a record number of individual contracts. In tune with the new world, cloud has been a key feature of the wins, accounting for over half of the value won and over 80% of the contracts by number. ECK highlights a $1.35m minimum contract won in March with one of the largest not-for-profit US healthcare corporations and also the renewal of the reseller arrangement with Intrado (formerly West) until 2024, which has been active recently, winning a 3-year contract with a Fortune 100 in Feb. In general the channel has pulled its weight this year with new partners also delivering “significant sized deals” and their role expected to increase over the coming years. Recall US SecPay contributed >30% of group revenues in H1.This is a market that we believe is worth multiple of current US SecPay sales (FY21E $13m- +60% yoy). With a current order book of over $25m and operating in an underpenetrated market, we see a valuable business with revenues of $30-40m emerging over a meaningful time frame. Our FYMar21 forecasts remain unchanged and we have yet to introduce FY22 forecasts but we view momentum in SecPay very positively and point to a group with a capacity to exceed the £5-6m FCF achieved in FY20/19 and a FCF yield over 5%. That’s attractive.
Eckoh’s fast growing US SecPay business and robust UK business model have minimised the impact of lockdowns with u/l H1 revs down just 3% yoy and profits flat. ECK reintroduces FY21 guidance, expecting H2 revenues comparable to H1 and FY21 AOP comparable to FY20. US SecPay is now a meaningful >30% group revs, growing 80% in H1 and with larger customers now re-engaging. We expect growth to continue in FY21 and beyond; the opportunity is multiples of current sales (FY21E $13m- +60% yoy). We similarly expect the cash cow UK business to continue to recover and return to c. 5% secular organic growth over time. It is especially continued success with US SecPay that is likely to lead to group FCF exceeding that of £5-6m achieved in FY20/19 over time and a FCF yield well above 5%. That’s attractive.
An H1 update to September reveals a robust performance notwithstanding a challenging macro backdrop - sales (ex. Coral) are just “slightly lower” y/y, indeed if also excluding an intentional move away from hardware-based Support, we estimate core revenue grew c.+7%. This was underpinned by continued strong growth in US SecPay: +80% y/y, now ~32%/group sales, while in the UK, we estimate sales fell by c.-11%. Here, Covid impacted transactional sales (rather than any permanent loss of business) such that a future recovery is likely in our view. Despite the lower sales and GP, it‘s impressive to note profitability is expected to be in line with 1H20 (AOP: £3.4m) following tight cost management. Looking ahead, there’s reason to be optimistic, as in US SecPay, large enterprise tenders that were paused in H1, may resume in H2. Meanwhile in the UK – and despite the headline sales figure – business activity is already reassuringly strong: total new business won grew 8% y/y in H1, this includes the major £4m/6yr contract with Capita and TfL announced in August. In addition, closing net cash of £12.9m (£2m FCF) continues to offer strategic options. We reiterate that this a high quality company, with a robust and cash generative UK business, while leadership position in a nascent and fast growing US market.
Following on from Capita’s announcement earlier this week, Eckoh announces it has secured a 6-year £4m contract renewal with Capita for the provision of Congestion Charge Services to TfL. Such contracts typically consist of minimum guarantees and volume related elements. Given the far greater reach of the LEZ and ULEZ and their 24/7 operating times, we imagine volume related elements could mean the contract ends up significantly in excess of the £4m mooted today over time. The high repeat revenue element of Eckoh’s UK business has helped it weather lockdown headwinds, with revenues and profit in April/May at comparable levels to the prior year. Today’s announcement is further validation of both repeatability and the ability to upsell in its highly cash generative UK business.
We are impressed that trading in the tough April/May period has been on a par with last year. Some delayed US SecPay deals have gone live and others are still in the pipeline, temporarily on hold. Volumes in UK consumer-facing businesses are picking up. FY20 results show a business firing on all cylinders and after the initial CV19 shock, we see numerous opportunities for growth, notably in the US, but also in the UK.
Eckoh’s trading update today implies record FYMar20 results in line with market expectations. While not disclosed today, we estimate that the US saw u/l organic revenue growth of c. 18%, and within that, Secure Payments estimated growth of c. 70%, driving EPS growth of some 80% yoy. These results and today’s CV19 update are in line with our update from 31st March. Some delays have emerged in US SecPay decision-making, but deals should conclude in due course. As we flagged, the UK has seen some volume declines, but expect a rapid recovery when lockdown ends. Looking beyond short-term disruption, the stand-out opportunity for Eckoh is US SecPay. Here Eckoh has momentum and is market leader in a nascent market with a patent-protected solution. All that for an historic FCF yield of c. 5.5%.
Interims reveal a particularly strong trading period for the group, with underlying organic sales growth accelerating to +20% c/c (previously mid-single digit), underpinned by both strong trading in the US (+c.50% u/l) and the UK (+11%). Additionally, Eckoh benefitted from a large perpetual Coral licence deal, bringing reported sales growth to +37%. In our view, these results speak to the strong proposition, opportunity and momentum Eckoh across its markets. We leave FY u/l forecasts unchanged but acknowledge they look more than achievable. Currently trading on a 5% FCF yield, rising to 6% in FY21E, we think Eckoh offers a unique investment opportunity.
Eckoh’s H1’20 trading update confirms another period of strong delivery, with the group trading in line with recently upgraded expectations. The board expects to report double digit revenue growth in both the UK and the US alongside “excellent” levels of contracted business. We are particularly encouraged by the increase in total business contracted in the US ($14.4m, +15% y-o-y) given the comparative period included the $7.4m US Secure Payments contract. With the recently launched Eckoh Experience Portal stimulating growth in the UK and a large untapped opportunity in US Secure Payments, we see no reason why the current positive momentum should not continue going forwards.
African Export-Import Bank a supranational financial institution w hose purpose is to facilitate, prom ote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE. DNEG Limited intends to apply for adm ission of its Shares to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
ECK KOOV PLUS BRSD GWI ORR ANIC TCM KEFI SIS
Eckoh’s Capital Markets Day yesterday highlighted the progress which has been made on the Customer Engagement side of the business. With all products now successfully integrated into the Eckoh Experience Portal, the group is uniquely placed to enable digital transformations within their customers. We were shown several live case studies where the group has been able to deliver both an improved experience for end users and significant cost savings for clients by implementing a connected cross-channel customer experience. Last month’s AGM Statement and Trading Statement confirmed strong underlying momentum in both divisions and we see plenty of scope for growth within Customer Engagement, which will augment the large untapped opportunity in US Secure Payments.
Eckoh has released a short AGM statement, confirming good revenue growth in both the UK and US through the first five months of the year. The level of new business contracted so far is “encouraging” and the group is trading in line with our recently upgraded expectations. The shares trade on a FCF yield of 4.8% rising to 6.1% in FY’21 and we continue to be excited about the group’s growth prospects. With strong underlying momentum in both divisions, a large untapped opportunity in US Secure Payments, and excellent revenue visibility, we believe the shares are highly attractive.
Eckoh has announced a new three-year contract to provide Coral, the contact centre agent desktop product, to a US Fortune 100 telecommunications company. The contract, worth a minimum of $3.8m over three years, is an extension to an existing client relationship and suggests that Coral is their long-term desktop of choice. While Coral contract wins are difficult to predict, this win validates our view that it is strategically important to the group as it provides a gateway to some very significant contact centres. We upgrade our forecasts this morning, resulting in a 6% increase in FY’20 adj. EBITDA. The shares trade on a FCF yield of 4.8% rising to 6.1% in FY’21. We continue to be excited about the group’s growth prospects, which combined with the high level of recurring revenue makes the shares highly attractive.
Eckoh’s FY’19 results confirm a strong year, with high levels of new business win activity providing a strong platform for growth in FY’20 and beyond. US Secure Payments remains the star of the show (and offers the greatest long term potential), but we are encouraged to see growth return to both divisions within the group. The outlook is positive, with strong sales pipelines in both the UK and the US and over 90% visibility over FY’20 revenue. The shares trade on a FCF yield of 4.8% rising to 6.6% in FY’21. We continue to be excited about the group’s growth prospects, which combined with the high level of recurring revenue makes the shares highly attractive.
Eckoh has released a positive trading update for the year to March’19. Trading was in line with expectations, with both the UK and US divisions delivering double digit growth in H2’19 following a strong first half for new business wins. Post the implementation of IFRS 15, we believe cash is the most important metric for the group. To that end we are highly encouraged by the strong cash generation in the period. Year end net cash of £8.3m is c.9% ahead of our £7.6m forecast, which was upgraded from £7.0m at the interim results, reflecting the contract win momentum throughout the year. With an “excellent” sales pipeline for the current year we expect continued strong performance from the group, confirming our belief that Eckoh represents one of the most exciting cybersecurity plays in the UK market.
Eckoh has issued a positive trading update highlighting continued positive momentum across the business. More than £10m in contract value has been secured since the half year (30th Sept), with a number of significant renewals also having taken place. We believe that cash remains the key metric to focus on whilst the effects of IFRS 15 are working through the P&L. The continued strong performance points to potential headroom for outperformance in our recently upgraded £7.6m net cash forecast. The FCF yield of 5.5% to Sept’19 screens well against peers in our wider software and services coverage (c.3%) offering significant upside potential to investors.
Eckoh (ECK LN) Largest ever US Secure Payments contract win | iomart Group (IOM LN) Steady as she goes | Quiz (QUIZ LN) Assessment of key partner and sector newsflow (H1 pre-close 11 Oct)
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Eckoh’s full year results to March’19 are in-line, as flagged at the May trading update. US Secure Payments continues to lead the way, driving 32% underlying growth in the US division. The UK is returning to form after a weak H1’18, with strong momentum going into the current year. We are making small underlying upgrades to our FY’19 forecasts, however the picture is complicated by the non-cash impact of adopting IFRS 15. Adoption of the new standards is expected to result in a delay in revenue recognition, meaning a material reduction in P&L profitability in the near term. We continue to be excited about the group’s growth prospects, which combined with the high level of recurring revenue makes the shares fundamentally attractive.
Eckoh (ECK LN) Another year of strong progress | Victrex (VCT LN) Well on track after record H1
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Since its interims in November, Eckoh has secured six sizeable UK contracts across the payments, insurance, healthcare and mobile telecoms sectors. This shows the group is seeing the positive impact of the restructuring it did earlier in the year to focus sales on larger strategic accounts, leveraging the entire product portfolio. We remain comfortable with our forecasts and make no changes. Eckoh offers an attractive opportunity to gain exposure to the exciting cybersecurity market with an undemanding valuation of 14.6x Mar’18 EV/EBITDA falling to 12.4x Mar’19 EV/EBITDA.
Eckoh’s interim results showed strong progression year on year across all key metrics driven by continued strong momentum in its US Secure Payments business. The group won another 7 contracts in this area worth $5.1m, both metrics significantly up y-o-y. With all contracts won on the preferred opex-style pricing model, the order book and visibility is also growing. We made no changes to our forecasts and believe the opportunities remain significant given the regulatory backdrop, increasing awareness of the risk and costs associated with security breaches and the group’s strong competitive positioning. We see another year of strong progress.
Eckoh has secured 2 new, 20-year US patents for its secure payment solution CallGuard. This IP protection is strategically important in preserving and helping grow value in the business, particularly in the US where it has won over $13m of payment contracts in the last 18 months and where opportunities remain significant. These awards confirm that the group remains at the forefront of contact centre security, an area we expect to see increased spending over the coming years. We remain bullish on Eckoh’s ability to capitalise on this opportunity and the resultant value creation.
Eckoh issued an in-line trading update for the six months to 30 Sept 2017, reporting double digit percentage growth in both revenue and gross profit. Of particular note is the continued strong momentum of the US secure payments business, winning 7 contracts in the period with a total contract value of $5.1m (nearly double the value won in H1’17). All 7 contracts were won on the preferred “opex” pricing model and means the group has now secured the same volume of opex-based contracts in H1’18 as were won in the whole of last year. The group’s growth prospects remain exciting given positive demand drivers, a strong product set and competitive positioning.
Be Heard (BHRD LN) agenda21 appointed lead digital agency by Addison Lee | Eckoh (ECK LN) US secure payments continue strong momentum | Rathbone Brothers (RAT LN) FuM +2.5% in Q3, Investment Management net inflows remain modest
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Eckoh held a teach-in on its US business yesterday, which also gave us the opportunity to meet the US management team. The event depicted a buoyant demand background in the US and it’s clear that Eckoh’s opportunities are significant. There appears to be a positive change in demand appetite and there remains little competition in the space. The group’s patents, implementation experience and presence on the ground provide areas of differentiation and barriers to entry. All of this is feeding into what looks to be a very healthy US pipeline, no doubt helped by the recent successful deployments in some very large enterprises (Fortune 50 US insurance company, Fortune 500 US financial services) which provide strong references. Outside of the secure payments space, the group also talked about some of its significant opportunities with a browser-based agent desktop tool, Coral. We are excited about the group’s growth prospects, which combined with very high levels of recurring revenues (76% of total revenues in year to Mar’17) make the shares highly attractive.
The group delivered FY results comfortably against expectations, with a transformational US performance. The total value of Secure Payments contracts won in the US was more than 5x the previous year, with only 21% recognised in FY’17. There are strong positive demand drivers in the US and with one of the leading propositions in the market, Eckoh will be well-placed to capitalise. The UK remains solid, with the Capita and other emerging partnerships contributing. Retention rates remain very high and with overall recurring revenues at 76% (and improving), we believe Eckoh offers exciting and visible growth opportunities.
Eckoh (ECK LN) Confident trading update; Comfortably in-line
Eckoh delivered interims in-line with expectations. UK growth was 11% whilst the US, reflecting a full period for PSS now accounts for 30% of sales. US Secure Payments wins gathered pace, with much larger contracts being won on SaaS-style pricing models and the pipeline at record levels. With contracts won in the first half feeding through strongly into the second half and given the group’s high level of recurring revenues (76%), the outlook remains positive for the rest of the year and we make no changes to forecasts. Eckoh has exceptional growth opportunities, particularly in the US, and we believe it can convert this to strong shareholder value.
Eckoh delivered a strong 2016 performance which showed a robust UK performance combined with a step change in the group’s performance in the US which has carried into the current fiscal year. We put through 9% revenue upgrades but keep our profit forecasts unchanged and remain bullish on its prospects. Eckoh operates in markets with strong structural drivers of growth and remains well-placed to convert opportunities. It has established a strong track record of delivering good growth in revenue, profits and cash secured by significant levels of recurring revenues. We believe it is only in the early stages of unlocking its potential, particularly in the US, and believe it will continue to deliver strong growth.
Eckoh has announced two significant US contract wins worth an estimated $7m over three years. One of the contracts (worth a minimum of $2m) was secured through West, the group’s US reseller partner, while the other (worth up to $5m+) was secured directly via recently acquired Product Support Solutions Inc (“PSS”). The group has also announced an updated distributor agreement with West Corporation which will see West continue to focus on delivering additional enterprise deals over the next three years on a non-exclusive basis. The updated agreement will allow Eckoh to expand its US presence with other US distributor partners, with the focus likely to be on the US mid- market. Today’s announcements highlight the growing traction which Eckoh is seeing in the US, both directly and through its partner channel. We make no changes to our forecasts at this early stage of the year but see the new contracts as strong underpinning of our full year numbers and see scope for further success in the US going forwards.
Eckoh announced today that trading for the 12 months ended 31 March 2016 was in line with market expectations, with revenue and margin growing by over 20% for the third year in succession. The US continues to show strong momentum with 14 contracts for secure payments solutions secured (9 in 2016), the first deal signed under the West partnership and the PSS acquisition performing well. A recent appointment of a new Senior Exec VP to head up all US sales (Secure Payments and Customer Contact Solutions) should help drive the business further. The UK also showed another strong performance with new client wins and important renewals. The balance sheet remains robust to support the group’s ambitions (organic and acquisitions). We remain positive on the shares as it continues to execute strongly with favourable demand dynamics both in the UK and US markets.
Eckoh (ECK LN) Strong trading update | Ergomed (ERGO LN) Proposed Haemostatix acquisition and conditional placing | Goals Soccer Centres (GOAL LN) Mixed AGM update
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Eckoh has announced that its US subsidiary has secured a new five year contract to provide secure payment services to Children’s Healthcare of Atlanta, one of the largest pediatric clinical care providers in the US. Today’s announcement continues the recent strong contract win momentum and marks the fourth customer win within the last nine months for the group’s recently patented tokenisation technology. This is also the first customer to utilise the group’s enlarged US on-the-ground presence post the PSS Help acquisition in November. This contract should further underpin Eckoh’s financial performance in the current year and beyond.
Eckoh announced it has entered into a new five-year contract with Ideal Shopping Direct Ltd, a leading multi-channel home shopping retailer in the UK and US. Ideal Shopping has been one of Eckoh's largest clients since 2005 and this significant contract represents the latest broadening of the scope of Eckoh's services. This contract should further underpin Eckoh's financial performance for the year ending 31 March 2016 and beyond.
Eckoh announced it signed a new 4-year multi-million pound global procurement contract with an existing client, a leading global financial services company. Under the terms of the new contract, which extends the scope and duration of Eckoh’s existing relationship, Eckoh and West have been selected as the client’s global partners to deliver the customer self-service provision. Retention of this significant client, with an extended scope and duration, is clearly positive. In addition, the collaboration with West represents a further strengthening of the relationship with this important US partner.
Eckoh issued a trading update confirming continued positive momentum in the UK and the US, including its first win under the West partnership. The market for secure payments is global and growing and Eckoh is well-positioned with established, patented/patent-pending solutions that can address this significant opportunity. Eckoh has been executing well, organically and acquisitions thus far, and now has a platform that can support both UK and international growth. With its international prospects only starting to convert, we believe its prospects are bright.
Eckoh has won its first contract via the West relationship, signing up a US media and entertainment group for its CallGuard solution. Combined with other contract wins, strength in the existing business and good progress with PSS in H2 so far, the company is on track to meet market expectations for FY16. We make no changes to our forecasts.
Last week, Eckoh announced the acquisition of US-based PSS for $5.6m on an EV-basis. We view the acquisition as highly positive as it provides Eckoh the infrastructure to generate and accelerate the conversion of its US and international opportunities. Today’s announcement of a $2m, 5-year PSS contract win with a Global Communications company is highly encouraging, illustrating the significant potential for the enlarged group. We believe Eckoh has a significantly stronger platform for growth.
Eckoh’s interim results confirmed that the company is on track to meet FY16 expectations. To support its US growth ambitions and to drive cross-selling opportunities, the company has acquired PSS for a net cost of £3.7m. We have incorporated PSS into our forecasts, driving earnings upgrades for FY16e/17e. Successful integration of PSS, progress with cross-selling opportunities and contract wins via its US channel partner could drive upside to our forecasts and the share price.
Eckoh has delivered a good set of interim results and announced an accretive acquisition that should accelerate its US and international growth strategy. In the US, West is making good progress with a large number of sales opportunities at the same time Eckoh continues to win new contracts via its direct sales capacity. The acquisition of PSS Help provides an infrastructure to help accelerate conversion of US and international opportunities. We have upgraded our adjusted PBT forecasts by 6- 8% (5-6% at adj. PS level) and remain excited about the group’s growth prospects.
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Eckoh announced a major new contract for the group’s Haloh payment solution with one of the world’s largest multimedia retailers, broadcasting to over 200m worldwide. The solution uses tokenisation technology, converting sensitive card data into tokenised, non-sensitive data. With the high-profile breaches that seem to occur on a weekly basis, we believe more and more companies are taking action to secure their data. This creates a positive demand environment for the group’s products and we remain excited about its growth opportunities. Interims out on 18 Nov
Eckoh announced it has been granted a US patent for the transaction security method and system that underpins its CallGuard product. Eckoh already holds an existing patent for its CallGuard On-Site solution. This protects the group’s investment in this technology and strengthens its position in the US, which we expect to be a significant growth opportunity going forward. Data security is a key priority for organisations, especially with the growing number of highprofile security breaches being reported. We believe Eckoh is well-positioned to capitalise on this global opportunity.
Eckoh issued a positive AGM statement, supported by a number of contract wins in the early months of the financial year. Both wins and pipeline indicate a growing interest in its secure payments solutions in international markets even as the group continues to gain ground in the UK. Eckoh announced separately that it won a 3-year contract to provide CallGuard for the Co-operative Group following a competitive tender. This win is a good indication of how large enterprises are prioritising the protection of their customers’ credit card data, a key driver of demand for the group’s secure payment solutions and a strong endorsement of Eckoh’s capabilities in the space. We are encouraged by acceleration in sales pipeline activity since the end of the summer period in the US and confident of another year of strong growth.
Eckoh announced an encouraging start to the year with a number of direct contracts for Eckoh CallGuard across international markets complementing ongoing progress in the UK. The pipeline in the core UK and US markets remain at “excellent” levels as the global demand for PCI DSS compliant payment solutions continue to grow. We continue to expect strong adjusted EBIT growth of 15%/25%/18% in FY16/17/18 and believe that its direct efforts together with key partner relationships such as that with Capita will drive another strong year for the group.
In FY15 Eckoh achieved another year of strong growth, while continuing to invest in building out its US business. Eckoh’s partner strategy continues to deliver new customers, and in the US could yield material contracts this year. The company is keen to drive growth from its existing customer base through cross-selling and has put in place initiatives to support this. We forecast EPS growth of 15% in FY16 and 19% in FY17. While the valuation looks full, successful execution of the growth strategy could drive upside.
Eckoh announced that it does not intend to proceed with the acquisition of Netcall following consultation with Netcall’s shareholders and the reluctance of a major shareholder in Netcall to support the acquisition. TheBoards of both companies are disappointed with the outcome. Whilst the combination of the two companies would have opened new avenues for the enlarged group, we remain confident of Eckoh’s organic prospects. The group’s execution continues to be strong as indicated by the recent March 2015 full year results showing strong revenue and profit growth. Management has displayed consistent solid execution which saw the group win new contracts, renew all significant deals, and extend its key partnership with Capita.
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