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ELMO Software’s share price lifts on Q1 update

The ELMO Software Ltd (ASX: ELO) share price is up slightly today after the company released its first quarter cash report and company update.

What did Elmo announce?

ELMO’s first quarter cash report was highlighted by the company’s largest Q1 cash receipts of $12.0 million, a 17% increase from Q1 FY19 and a 41.5% increase in cash receipts over the last twelve months of $46.8 million. In addition, ELMO saw a successful capital raise of a $55.0 million placement in the first quarter and a $15 million share purchase plan to assist the next phase of growth.   

The company’s closing cash balance at 30 September 2019 was $67.8 million, ensuring that ELMO is well poised to support continued organic growth and future mergers and acquisitions. According to the report, the first quarter was a key investment period for ELMO with the company experiencing a 26% increase in recruitment across client services, research and development and sales and marketing.

Chief Executive Officer, Mr Danny Lessem commented:

[ELMO’s] convergent solution is gaining market traction and broader customer support. We are executing on our strategy to increase customer share in the lower mid-market and we are successfully cross selling modules across our broad customer base.

The company also provided an update on its strategic partnership with the University of Technology Sydney (UTS) to develop an artificial intelligence driven analytics platform.

ELMO also reaffirmed guidance on annualised recurring revenue of $61-63 million, revenue of $53-55million and earnings before interest, tax, depreciation and amortisation of $1–3 million for FY20.

How has ELMO performed?

ELMO is a cloud-based HR and payroll software company that provides clients with a unified platform to streamline employee administration, recruitment, rostering and payroll. The company operates its cloud-based software under a software-as-a-service (SaaS) recurring revenue model, servicing more than 1,100 companies in Australia and New Zealand.

Earlier this year, the company reported a strong FY19 report with growing recurring revenues and a strong focus on acquisitions and research and development. ELMO reported that it holds an estimated 9% of their total addressable market in Australia and New Zealand and boasts an impressive 92.1% customer retention rate.

Earlier this month, ELMO successfully completed a $15 million share purchase plan to eligible shareholders at an offer price of $6.00 per share.

The ELMO share price is up slightly at the time of writing to $6.63 per share.

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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia has recommended Elmo Software. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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