Progress of whistleblowing legislation through the German Bundestag has been slower than hoped, with transposition now likely in December, with a three-month implementation period. This delay means that management is now guiding to FY22e revenue growth of 25%, with EBITDA of €6.0m (was €6–10m). The EBITDA figure is in line with our forecast, despite the lower revenue (€3.2m below) reflecting a degree of flexibility on costs. The underlying boost from legislation coming into force across Europe remains a strong positive from FY23. EQS reported 9M22 revenue growth of 27% (10% organic), with 702 new SaaS customers signed up, including 555 for whistleblowing.
Year end |
Revenue (€m) |
EBITDA (€m) |
PBT* (€m) |
EPS* (€) |
EV/EBITDA (x) |
P/E (x) |
12/20 |
37.6 |
4.8 |
0.4 |
0.04 |
56.2 |
573.2 |
12/21 |
50.2 |
1.7 |
(5.9) |
(0.70) |
153.5 |
N/A |
12/22e |
62.8 |
6.0 |
(4.3) |
(0.30) |
44.6 |
N/A |
12/23e |
86.5 |
17.5 |
7.6 |
0.51 |
15.3 |
46.2 |
12/24e |
107.0 |
27.0 |
17.7 |
1.19 |
9.9 |
19.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Compliance segment drives growth
Revenues from cloud-based compliance products, which comprise roughly half of 9M22 group revenues and include the whistleblowing products, were ahead 73% on 9M21 (+29% adjusting for the base effect of Business Keeper). This is without the stimulus of the German legislation coming into force, now expected in December. Sales through partners are yet to fully kick in, although the pipeline is building encouragingly. Compliance cloud service 9M revenues (18% of group) were up 6%, boosted by the European Single Electronic Format Regulation requirements in filing. On the Investor Relations side, cloud products revenues (16% of group) grew 9% as subscriptions built on the COCKPIT platform. However, cloud service revenues (16% of group) were down 11%, reflecting the complete absence of IPOs.
EQS bought Business Keeper for €95m in June 2021, assisted by an acquisition loan of €50m from Commerzbank. Half of this was repaid with the proceeds of the subscription fund-raising in Q122 (at €33.0/share). The remainder has now been refinanced over five years, and extended by a further €5m, with Deutsche Bank and Kreissparkasse Biberach added to the banking consortium. Interest is at Euribor plus a margin, which varies with leverage and achievement of sustainability objectives. Repayments will be in equal instalments starting mid-2023.
Valuation: DCF indicates meaningful upside
EQS’s share price is down 47% year-to-date, while valuations of financial B2B companies have fallen 30% (excluding Euromoney, subject to a bid) and application software companies by 36%. With traditional valuation multiples unhelpful, we use a DCF, with a WACC of 9% and terminal growth of 2% (unchanged), deriving a value of €41.29/share (August 2022: €47.73), well above the current market price.