The ELMO Software Ltd (ASX: ELO) share price is rising on Thursday after the business announced that it had extended its debt facility with Commonwealth Bank of Australia (ASX: CBA).
ELMO boosts financial ammunition
HR and payroll software business ELMO announced $20 million of increased capital flexibility to further executive on its growth strategy.
There is additional liquidity comes from a combination of both an increase in the debt facility with Commonwealth Bank of Australia as well as the conversion of the cash component of the Webexpenses earnout to a share-based payment.
ELMO's chief financial officer (CFO), James Haslam, gave some more details about what has happened:
The increase in capital flexibility further strengthens the bridge towards cash flow breakeven.
The additional liquidity comes from two sources. Firstly, we have secured a credit approved term sheet with the CBA for an additional $11 million. The upsized facility is on the same commercial terms as the original facility.
Secondly, the cash component of the Webexpenses earnout, estimated to be over $9 million at 31 October 2021, will now be settled through an issue of shares.
The additional balance sheet flexibility coupled with the growth and momentum we have already seen through the first quarter has put the ELMO Group in a very strong position as we continue to execute on our growth strategy.
Growth from acquisitions and organic sources
The ELMO share price has dropped 18% over the last year, but it has continued to report growth to the market.
A month ago, the business reported its FY22 first quarter update for the three months to September 2021. It said that it achieved annualised recurring revenue (ARR) growth of 61% to $88.5 million. Organic ARR growth was 35%.
Total revenue increased 52% to $20.7 million and cash receipts went up 78% to $27.7 million.
There are two different segments to ELMO.
It has its original mid-market ELMO segment, which saw ARR growth of 43% to $78.4 million, with organic growth of 28%. Organic growth is being driven by winning new customers, coupled with the cross-sell to existing customers.
Then there's the businesses it has acquired – Webexpenses and Breathe. During the quarter, the ELMO's mid-market solution was launched in the UK, leveraging the Webexpenses operational footprint and the Breathe small business platform was launched in Australia.
Breathe, operating in the small business market, saw ARR growth of 55% over the past 12 months. The growth in the small business segment is being driven by the onboarding on new customers and also the cross-sell of new modules introduced since acquisition.
At the time of the first quarter update, the ELMO CEO and co-founder Danny Lessem said:
We are very excited to have launched ELMO mid-market in the UK and Breathe small business in Australia during the quarter, providing us with exciting new revenue opportunities for future growth.
Finally we have strong momentum coming into Q2 with a positive macroeconomic backdrop and with small and medium sized businesses continuing to adopt cloud-based solutions to manage a flexible workforce.
