The ELMO Software Ltd (ASX: ELO) share price has jumped 9% in response to its FY22 half-year business update.
ELMO Software describes itself as a HR, payroll and expense management business.
ELMO’s solid HY22 result
The company revealed that it is continuing to deliver on its growth strategy, following on from a good FY22.
For the six months to December 2021, its revenue grew 41% to $43.1 million. Cash receipts surged 63% to $56 million. Over the last 12 months it has received $100 million of cash receipts.
Annualised recurring revenue (ARR) increased to $98.3 million, it achieved annualised organic growth of 35% compared to 30 June 2021. The ARR was $52 million two years ago and $20.8 million four years ago. However, the ELMO share price has not gone in the same direction.
In this result, ELMO said that its annualised ARR growth for the mid-market was 34% to $87.4 million, whilst Breathe’s (small business) ARR growth was 41% to $10.9 million.
It finished with $58.4 million of cash on hand as at 31 December 2021.
Perhaps the most promising and important development from the update was that ELMO Software generated $0.3 million of EBITDA (EBITDA explained).
Management said that these were strong results, growth has exceeded expectations in the first half of FY22 and consequently upgraded its FY22 guidance.
Upgraded FY22 guidance
ELMO is now expecting to break through the $100 million ARR milestone even stronger in FY22.
The upgraded guidance has added another $2 million of ARR, $0.5 million of revenue and $0.5 million of EBITDA to expectations for FY22.
ARR is now expected to end the year at between $107 million to $113 million, which represents growth of 28% to 35% year on year growth.
Revenue for FY22 is expected to come in between $91 million and $96 million – this would be year on year growth of 32% to 39%.
EBITDA is now expected to be in a range of between $1.5 million to $6.5 million.
Final thoughts on the ELMO share price
ELMO is a leading ASX tech share and, despite today’s surge, it’s still down more than a third over the next year.
I think ELMO could be a solid business for the longer-term, particularly due to its expanding addressable markets. It’s one of the better value ASX growth shares in the tech space in my opinion.
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