The ELMO Software Ltd (ASX: ELO) share price is on watch after releasing its FY21 report, showing continued strong double digit growth.
ELMO is a business that provides cloud-based software for small businesses and mid-size organisations to manage people, process, pay and expenses.
ELMO FY21 result
ELMO said that its revenue increased by 38.1% to $69.1 million. Cash receipts also rose quickly, up 38.8% to $79.8 million.
The number of ‘mid-market’ business customers grew 85.1% to 3,114.
The company may already have more revenue baked in. Its annualised recurring revenue (ARR) number rose by 52.1% to $83.8 million. Mid-market ARR increased 35.7% to $74.7 million (up 35.7%). Mid-market revenue went up 27.1% to $63.6 million. The mid-market profit margin rose 1% to 86.4%.
The small business solution, called Breathe, saw ARR growth of 51.8%. Its customer base grew to 9,069 whilst the gross profit margin was 89.5%.
Investors may be particularly pleased to see that its EBITDA (EBITDA explained) turned positive. Its EBITDA was $0.4 million, an increase of $3.3 million. The business saw its cost (to revenue) ratios reduce and it experienced some operating leverage come through.
ELMO finished the period with $81.9 million of cash on hand.
FY22 outlook
ELMO provided guidance for a few different statistics.
It’s expecting ARR to rise to a range of $105 million to $111 million – the low point of that guidance suggests an increase of at least 25.3%.
The revenue guidance is for a range of $90.5 million to $95.5 million. That would be growth of at least 31%.
EBITDA guidance is for a range of $1 million to $6 million. That suggests growth of at least 150%, or $0.6 million in dollar terms.
Management comments
ELMO CEO and co-founder Danny Lessem said: “In FY21, ELMO completed two significant acquisitions. The first was Breathe, a rapidly growing self-service small business HR solution. The second was Webexpenses, a market-leading expense management solution for the mid-market in the UK.
“We have completed integration of the Webexpenses solution, and it is being successfully cross-sold in the ANZ region. We have also leveraged Webexpenses operational footprint in the UK to launch ELMO’s mid-market HR solution there.”
Summary thoughts on ELMO and the share price
The company continues to grow at a strong pace. In the second half of FY21, ELMO added modules to the Breathe suite in the UK and it’s seeing a strong uptake. It also recently launched Breathe in ANZ and expects growth in FY22.
Management said FY22 is expected to be a good year for both of its small and medium divisions.
The ELMO share price is certainly one to watch if it can continue this strong double digit revenue growth. It’s not on my watchlist, but if I were interested I’d be happy to make a small buy today.
But there are other ASX growth shares even higher on my watchlist at the moment.
