The Damstra Holdings Ltd (ASX: DTC) share price went up by around 6% after a strong update.
Why did the Damstra share price go up?
Damstra reported a strong quarterly performance for the period to 31 March 2021. Quarterly revenue went up 66% to $6.9 million compared to the prior corresponding period.
It generated its highest ever monthly revenue in March 2021. Annual recurring revenue (ARR) at 31 March 2021 was $33 million, up 98% from the prior corresponding period.
The business won 30 new clients during the third quarter of FY21, taking the year to date new clients won to 102. Active user numbers increased by 61% to 689,000. The client churn remains at less than 1%. Those are good numbers for driving future profitability.
Damstra said that its operating cash receipts was $7.2 million for the quarter.
It achieved a record gross profit margin, on a year to date (YTD) basis it has now expanded to 81%, up from 67% in the prior corresponding period. This was achieved by continuing leverage from increased scale.
The year to date EBITDA margin (EBITDA explained) has increased to 20%, up from 15.3%. Scale and operating leverage are helping here.
Another point that Damstra pointed out was that the synergies target from the Vault acquisition of $5.2 million has been further upgraded and is now finalised at $6 million.
The company also said that to provide Damstra with a large amount of financial flexibility to pursue its growth plans, it has executed a credit approved term sheet with Longreach Credit Investors with a new $20 million debt facility.
Damstra boasted that its products are now being used in the UK, Holland, Ghana, Antartica, Hong Kong, Singapore, Philippines, the US and so on.
Management comments
Damstra CEO Christian Damstra said: “We are now seeing a sustainable accelerating growth profile. This has been achieved due to strong organic growth in the construction, mining, and aged care sectors, underpinned by the strong cross sell of products to existing clients, in the workflow and mobility areas.
“Strategically, current and prospective clients have responded extremely favourably to the launch of our new EPP [Enterprise Protection Platform] positioning, recognising how Damstra’s product suites have evolved to work not only individually, but also, critically, how they can orchestrate seamlessly into a fully unified offering. Large clients now have great confidence that we can deploy Damstra’s EPP at an enterprise level rather than be seen as a single point solution.”
Summary thoughts on the Damstra share price
The Damstra share price is down around 42% over the last six months, so it’s cheaper than it was. The margins are increasing at an impressive rate and the churn rate remains low.
It’s certainly one to watch, but I don’t know enough about it to call it a high conviction buy. But it’s one I’ve put on my ASX growth shares watchlist because it has a lot of good factors.
