Why the ELMO (ASX:ELO) share price will be on watch this morning

The ELMO Software Ltd (ASX: ELO) share price will be one to watch closely on Tuesday morning following a positive update. Here’s what the company announced.

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The ELMO Software Ltd (ASX: ELO) share price will be one to watch closely this morning.

This follows the cloud-based human resources and software solution provider’s announcement of a guidance update.

ELMO surges with growth ahead

ELMO shares could be on the move today as investors digest the company’s latest release.

In a statement to the ASX, ELMO advised that it is seeing positive momentum continue across its business units. While COVID-19 has affected most businesses, the company highlighted its increasing remote-based workforce. Therefore, delivering cloud-based solutions is thriving.

As a result, ELMO updated its FY21 guidance with the following:

Annualised recurring revenue (ARR) is projected to come in at $83 million to $85 million. This is within the mid-range of the previous $81.5 million to $88.5 million indicated.

Revenue is set to increase between $68 million to $70 million. Previously, the company had revenue set at $65 million to $71 million for FY21.

Earnings before interest, tax, depreciation and amortisation (EBITDA) is narrowed to a loss of -$2.5 million to -$3.5 million. This is a smaller gap than the previously stated EBITDA of -$2.4 million to -$7.4 million.

Comments from the CEO

ELMO CEO and co-founder, Danny Lessem hailed the robust performance, saying:

I am encouraged by the strong growth we’ve seen so far in the second half. There is positive sentiment in the market, and it is pleasing to see procurement starting to return to pre-COVID levels.

Our growth strategy remains on track. ELMO’s customers are able to effectively manage increasingly dispersed workforces with our broad, integrated and convergent solution. Our value-proposition is stronger than ever, and ELMO remains well placed to benefit from tailwinds in the adoption of cloud- based technology.

ELMO share price snapshot

The ELMO share price has lost almost 25% over the past year and is down more than 20% year to date. The company’s shares hit a 52-week high of $7.86 last June, before going on a rollercoaster ride.

On valuation metrics, ELMO presides a market capitalisation of about $438 million, with approximately 89.2 million shares on issue.

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Aaron Teboneras 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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