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EQS Group
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== Company description: Cloud-based regtech provider == EQS’s business is split into two segments, Compliance and IR, and it has recently announced its intention to build a third leg on Sustainability Reporting. Compliance covers products that are required to fulfil a regulatory obligation, while IR includes products designed to facilitate digital investor and corporate communications. The introduction of sustainability reporting provision is also in response to forthcoming EU regulation, which will require companies to report various ESG metrics in specific formats. EQS is one of the largest global providers of digital solutions, designed to automate and simplify processes for those individuals working on the technical administrative aspects of running a corporate concern, enabling them to free up their time to deal with matters that require more than simple information processing. By ensuring that the cloud-based product suites provided are constantly updated for the latest regulatory compliance changes and delivered via intuitive interfaces, EQS should continue to add value for its users. Originally centred on investor relations (which in Germany and some other markets includes functions covered in other jurisdictions by the company secretary or equivalent), the group’s products and services have been expanded across the related areas of compliance. EQS Group was founded in 2000 in Munich, initially building a strong market position in its home markets of Germany, Switzerland and Austria before starting to expand its presence in overseas territories. EQS looks to position itself as a partner with its client companies, working alongside them to solve issues and reduce inefficiencies, rather than simply as a supplier whose interest may not extend beyond the initial sales timeframe, with a growing emphasis on providing SaaS. The shift away from paper-based information to digital channels of communication between corporate entities and their various stakeholders has been a key driver of growth, accelerated by the pandemic. The honed business model is focused on building subscription and annually recurring incomes as a proportion of the whole, increasing the quality of the earnings. '''Exhibit 1: FY21 revenue by segment'''<ref name=":0">Source: EQS Group accounts.</ref> [[File:Image3-9589bf31951e17ab949784badc9e0c4c.png|600x600px]] '''Exhibit 2: FY21 revenue by geography<ref name=":0" />''' [[File:Image4-666e5cc13984687522afaf3577c161a8.png|600x600px]] The group has added to its offering through acquisition as well as through internally developed platforms and tools and has used a combination of cash, debt and equity to fund both aspects. The purchase of Business Keeper in June 2021 was the largest acquisition to date, with a transaction price of €95m. This significantly scaled up the exposure to digital whistleblowing, making the combined group the clear market leader in Europe. It added over 300 customers and around 100 employees, the customers predominantly being large corporations, including 16 DAX-listed companies. Business Keeper currently generates annual recurring licence revenues (ARR) of approximately €10m and was previously EQS’s strongest competitor in Germany. In addition to its headquarters in Berlin, Germany, EQS also has technology centres in Kochi (India) and Belgrade (Serbia), giving it access to a far wider pool of programming and technical talent. === Aiming for European market leadership === Management has a clear goal. Its aim is for EQS to be the leading European cloud provider for global IR and corporate compliance solutions by 2025. The progress it has made in whistleblowing is not yet fully reflected in revenues (due primarily to the regulatory delays) but has given the group an entrée into a far greater number of corporates and so increased the lead pipeline for sales of the broader offering. IR delivered 39% of group revenue in FY21, roughly equally split between cloud-based products and services. Compliance revenues, which make up the balance, are far more heavily skewed to cloud-based products. === Overview of IR offering === Within IR, the group provides (cloud-based) products such as its Newswire service, investor data management, CRM, mailing and roadshow management tools, which are increasingly served via its COCKPIT cloud platform. The IR COCKPIT has a similar interface to the Compliance COCKPIT, shown below, albeit with different tiles. External to the platform are various cloud services, such as websites, tools, reports, webcast, virtual AGM facilities and various media options which were of particular value in communicating with the relevant stakeholders during the periods of lockdown over the course of the COVID-19 pandemic. This aspect of group revenue is also sensitive to the general health of equity and bond markets, so has been affected by the dip in sentiment caused by the invasion of Ukraine. In particular, it is also affected by the health of the IPO market, which has been detrimental to performance in recent periods. Over the last couple of years, management has focused on migrating existing clients for IR products onto the COCKPIT platform, both as a benefit to efficiency but also as a precursor to cross-selling. The other key advantage of moving customers onto the platform is that it builds recurring SaaS revenues. By end March 2022, the group had IR SaaS COCKPIT contracts in place with 964 companies. The total number of IR SaaS customers stood at just over 2.5 thousand, up 372 on end Q121. === Overview of Compliance offering === EQS’s Compliance segment provides tools for companies to fulfil their regulatory obligations. These products include News (Disclosure), Insider Manager, Integrity Line, Policy Manager, Approval Manager, Third Party Manager and Rulebook. These are increasingly being offered as part of the Compliance COCKPIT, with an intuitive client interface, as illustrated in Exhibit 3. The group also provides various cloud services, including regulatory filing in XML and XBRL formats and legal entity identifier issuance. These are separately reported as they are not necessarily conducted via the COCKPIT. '''Exhibit 3: Compliance COCKPIT client interface<ref name=":1">Source: EQS Group.</ref>''' [[File:Image5-e82b789cadf89720d0020af2ea338683.png|556x556px]]
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