Esker SA (ALESK) Earnings Call Transcript & Summary

Good afternoon. [Foreign Language] Thank you for joining the Esker Web Conference. So today, we are going to present and discuss our second quarter 2024 results. So here with me, we have Jean-Michel Bérard, the Esker CEO and Founder; and we have Emmanuel Olivier, our CEO. So today, as Jean-Michel and Emmanuel are going to explain how the company performed during the second quarter. So we will start by sharing the key highlights for Esker and we provide you in a deep dive into the 2024 second quarter financials. So we'll then move to our Q&A session. So you can submit your questions within the panel on the right side or you can raise your hand, so we can turn your mic on. So let me now hand over to Jean-Michel on an overview of the second quarter 2024.

Thank you, [ Zaena ]. Jean-Michel speaking. I'm going to share with you 7 slides regarding the second quarter of this year. And then after that, Emmanuel and I are going to answer your question. So we just achieved a quarter slightly over EUR 50 million, at EUR 51.5 million. And that represents first half of the year at EUR 99.2 million, so almost EUR 100 million. So it's a growth for the quarter at plus 14%, which is the highest range of our targets. And for the entire first half, our growth is 13%. Of course, this growth is driven by the SaaS as usual, 13% for both H1 and Q2. For the first time, we have split the SaaS revenue into 2 components: the subscription and the transaction. And you can see that the subscription is growing very fast at plus 30% for the first half and 32% for Q2, even faster. And SaaS transaction is down by 1% for the first half due to a low level of volume and also the focus of the company being commercially fully focused on the subscription. The implementation services are growing by 25% for the first half, 28% for Q2, which is a high level for this product line. It corresponds to the fact that we have plenty of deals to be implemented and to be connected with the customer system. And as usual, the legacy product, which represents a mere 1% of the revenue, were down by 55%. Region by region, it's quite even. We enjoy almost a nice growth for Q2 in Europe and America, in the Americas. For H1, it's almost the same. So the Americas are getting better. This is the outcome of the very good Q4 and Q3 and Q4 last year in terms of bookings. And Asia Pac is bouncing back again after a quite disappointing year during '23. So consulting represents 17% of the revenue, SaaS is 82%. And as I mentioned, the legacy products represents only a mere 1%. Regarding the SaaS revenue. So as usual, we split this revenue into the subscription and the transaction. So we pass -- we break another record during this quarter at EUR 42 million of SaaS. And as you can see, the subscription is growing and even accelerating at plus 30%. And at the expense of the transaction that we tend to sell less and less and where the volume is not that great during this first half. Regarding the bookings, it was also a very good quarter. We have achieved -- we break another record at EUR 7.3 million in terms of bookings. The last one was EUR 7.1 million during Q4 2023. And it represents for the quarter, 65% growth versus Q2 last year. And if we look at the first half, it's 50% over the first half of 2023. So a very good start of the year, both in terms of revenue and in terms of bookings. If we zoom into the booking by solution and by region, all of our solutions are growing. You can see that we post a terrific growth regarding accounts receivable at plus 112%. Customer services as well, which was disappointing last year during that period, 114% and 20% growth on Source-to-Pay, which is the biggest product line in our portfolio. And if we look at by region, 52% for Europe, 37% growth for Asia Pac, which is which is a nice growth and 116% growth in Americas, a stellar one in comparison, obviously, with a disappointing first half last year, but still much, much bigger than any first half we ever made. And France is doing quite well at plus 18%, helped by the e-invoicing mandates but to a much less extent than it was 1 year ago. The major events for Esker during this past quarter, we've been named as a leader in the Gartner I2C Magic Quadrant. I2C stands for Invoice to Cash. So it's the entire accounts receivable solution for us. We've been named as a leader by Forrester Wave for a market they call APIA, which stands for Accounts Payable in Invoice Automation. We have been named as #1 for the Global Happy at Work ranking, evaluating all the company internationally. So they pull also the people in the subsidiaries. So it's a great achievement as well because Esker has always been paying a lot of attention to the good of the employees. We set up a partnership with Ernst & Young regarding the French invoicing mandate, E&Y selling the consulting and the change management while we sell the platform. We are about -- regarding invoicing, we are about to be officially registered as an invoicing operator in France. All the paper has been filed, all the certification has been get. So nothing is preventing the administration to give us the final registration. It's clear on our side. We set up also a nice partnership with a company called [indiscernible] that develop for us a connector for the ERP for the ERP Sage, EVP and Microsoft Business Central. This company is part of a bigger group called [indiscernible] and they are reselling sales solution and Microsoft Business Central Solution to a very large network of resellers. So for us, it's one milestone towards the strategy, which is to go through OEM when it comes to serve the small and medium market. We've made a lot of progress regarding AI. So we are using AI transformers, which is the underlying technology for ChatGPT, but we specialized it and document recognition. We applied that for the sales order, but it's going to go for invoice, super invoice as well in the next release. We have improved the document recognition by 10% to 20%, which is very significant. We have also made some progress regarding our strategy to cover also the nonfinancial data and particularly the GHG or greenhouse gas emission, and then we are able to compute the Scope 1, 2 and 3 based on the data we extract out of the invoices received by a particular customer. And last but not least, we have also used our first RAG, which stands for retrieval-augmented generated AI. So it's a way to dump a bunch of documents, a bunch of information into a database to create what they call a vector for a database of vector, which is the semantic understanding of all the documents. And then after this process, you can ask any sort of question and the system will answer you based what it knows. We are using it in the customer service solution in order to vectorize the whole catalog of our customers. Therefore, the AI can answer any customer question regarding the specification of any products. That's very powerful and something that is highly satisfying the customers. Just to finish, this is our sales pipeline. So the deals that are not closed yet, but we are working on them in order to close them to our sales force. So it's flat at EUR 198 million. It's an increase of 9% but very healthy. It's a big amount, of course, but it shows also that we are closing deals on a regular basis. We are not just entering deals that are supposed to close. We closed them. That explains why it's flat, slightly down during -- since the beginning of the year, basically. So very encouraging pipeline. And just to take one message, we have achieved a record quarter for the revenue as well as a record first half. We beat another time our record regarding bookings, which is quite unusual for Q2. Q4 tends to be stronger. And we can confirm that our revenue growth will be comprised between 12% and 14% for the whole year. And our operating income will be well between 12% and 13% for the whole year as well.