Why the Damstra (ASX:DTC) share price is jumping 9% higher today

The Damstra Holdings Ltd (ASX:DTC) share price is jumping on Tuesday following the release of its third quarter update…

| More on:
rising asx share price represented by woman jumping in the air happily

Image source: Getty Images

In morning trade the Damstra Holdings Ltd (ASX: DTC) share price is jumping higher.

At the time of writing, the integrated workplace management solutions provider’s shares are up 9% to $1.21.

Why is the Damstra share price charging higher?

Investors have been buying Damstra’s shares today after it released a solid third quarter update.

According to the release, for the three months ended 31 March, Damstra recorded revenue of $6.9 million. This was up 66% on the prior corresponding period.

This strong quarter takes the company’s annualised recurring revenue (ARR) to $33 million, which is almost double what it reported a year ago.

Positively, trading conditions appear to have strengthened as the quarter progressed, leading to the company recording its highest ever monthly revenue during March.

Key drivers of this growth were its churn of under 1% and the addition of 30 new clients during the quarter. The latter brings its year to date new clients to 102. This played a role in driving its active user numbers 61% higher year on year to 689,000.

Another positive from the release was an update on the acquired Vault business. The company has identified further synergies and has upgraded its target to $6 million.

Management commentary

Damstra’s CEO, Christian Damstra, commented: “We are extremely pleased to see record Q3 revenues with an increase of growth accelerating to a record 66% growth level in the third quarter (versus PCP). 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.”

“The Vault integration is now complete, and we are pleased to report final realised synergies of $6m, which far outstrips our original forecast of $4m. This has enabled Damstra to swiftly offset the financial impact of Vault’s previous operating cash loss business profile, as demonstrated by Damstra’s positive operating cashflows, EBITDA and increasing Gross and EBITDA margins.”

“Strategically, current, and prospective clients have responded extremely favourably to the launch of our new EPP 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,” he concluded.

FY 2021 guidance

Damstra is now forecasting revenue of between $28.5 million and $30.5 million for FY 2021. This will be up 21.3% to 29.8% on FY 2020’s revenue of $23.5 million.

And while this is down from its previous guidance of $33 million to $35 million, the market appears to have been expecting even lower revenues after a tough first half.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

James Mickleboro 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 Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers