ELMO (ASX:ELO) share price on watch after full-year result

Why the Aussie tech share will be in focus on Monday morning.

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The ELMO Software Ltd (ASX: ELO) share price is one to watch on Monday morning after the Aussie software group reported its financial year 2021 (FY2021) earnings to the market.

ELMO share price in focus as revenue guidance achieved

The cloud-based human resources and payroll software company reported its FY2021 results highlighted by the following:

  • Annualised recurring revenue (ARR) of $83.8 million, up 52.1% on FY2020 figures. Organic growth of 26.0% in mid-market and small business operations, as well as recent acquisitions, helped deliver this result.
  • Full-year revenue climbed to $69.1 million, up 37.9% on FY2020 figures.
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $0.4 million compared to a $2.9 million loss in FY2020.
  • Gross profit of $59.9 million compared to $42.8 million in FY2020.

ELMO previously provided FY21 guidance of $83 million to $85 million ARR and revenue expectations of $68 million to $70 million. Based on the above, today’s results were largely in the mid-range of guidance, making the ELMO share price one to watch this morning.

What happened in FY21 for ELMO?

The ELMO share price has been under pressure in FY21. Shares in the Aussie software group are down 10.9% in the last 12 months. A capital raising and FY20 revenue at the lower end of guidance both put pressure on the Aussie tech share.

ELMO continued to roll out new modules and technology offerings throughout the year. These included the launch of its Predictive People Analytics module, predicting the “flight risk” of high performers, and its ELMO Experiences module subsequent to year-end.

What did management say?

ELMO CEO and co-founder Danny Lessem commented on the company’s performance:

We saw strong growth returning throughout 2H FY21 from the mid-market segment and growth accelerating in the Breathe (small business) segment.

Returning business confidence and the increase in remote based working is driving the adoption of cloud-based business tools including HR technology. FY22 is shaping up to be a good year for ELMO, across both mid-market and small business segments.

We anticipate strong growth in FY22 and expect to surpass $100 million in ARR, an exciting milestone.

What’s next for ELMO?

According to the company’s results release, ELMO is looking to expand its footprint in the UK by leveraging the recent Webexpenses acquisition to launch ELMO in that market.

ELMO’s FY2022 guidance includes group ARR of $105 million to $111 million with revenue of $90.5 million to $95.5 million. Group EBITDA is projected to climb to $1 million – $6 million this financial year.

The ELMO share price has been under pressure for the last 18 months or so. The Aussie tech share will be in focus following this morning’s results announcement after the company hit its ARR and revenue guidance.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Elmo Software. The Motley Fool Australia owns shares of and 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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