The ELMO Software Ltd (ASX: ELO) share price has fallen 6% after giving its FY21 second quarter.
ELMO is a cloud-based HR and payroll software provider. It offers clients a combined platform to do all of their HR whilst managing payroll, rostering, time and attendance. It operates on a software as a service (SaaS) business model.
ELMO’s Q2 update
The company reported a record quarter of cash receipts of $18.8 million, up 22.1% compared to the prior corresponding period.
Cash receipts over the last 12 months were $64.5 million, up 23%.
There were other highlights in the quarter. It acquired Breathe in October 2020, which gave ELMO access into the small business market in Australia, New Zealand and the UK. It then acquired Webexpenses in December 2020, with entry into expense management and accelerating ELMO’s mid-market expansion into the UK market.
Half year highlights
ELMO said that its annualised recurring revenue (ARR) reached $74.2 million, an increase of 42.8% compared to the first half of FY20. This was driven by new customer growth, the cross-selling to ELMO’s existing customer base and complemented by the acquisition of both Breathe and Webexpenses.
The software company reported that its statutory revenue went up 29.3% to $30.6 million for the six months. Cash receipts for the half-year were $34.4 million.
Management comments
ELMO CEO Danny Lessem said: “We have had a strong first half in FY21 with the highest half year cash collection in ELMO’s history.
“The first half of FY21 was an important period for the business as we laid the foundation for high levels of organic growth with entry into the small business market segment and expansion into expense management.”
Summary thoughts
ELMO re-affirmed its guidance for FY21. Annual recurring revenue is expected to come between $81.5 million to $88.5 million. Revenue guidance is for a range of $65 million to $71 million. EBTIDA guidance (EBITDA explained) is for a range between negative $7.4 million to negative $2.4 million.
ELMO is a promising business and its revenue continues to improve. It seems like FY22 could be an inflection point year for ELMO as it integrates its acquisitions, generates positive EBITDA and continues to grow organically. The increase in the addressable market is helpful for long term growth potential.
There are other ASX growth shares that appeal to me more though, like Pushpay Holdings Ltd (ASX: PPH) or Redbubble Ltd (ASX: RBL).
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