Damstra (ASX:DTC) share price tumbles 11% as guidance downgraded

The enterprise protection software business released its AGM presentation today. Here are the details

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The Damstra Holdings Ltd (ASX: DTC) share price is falling today and is now down 10.68% at 46 cents.

Shares in the enterprise protection software business took a hit from the open following the release of Damstra's AGM presentation this morning.

Language at the AGM acknowledged "the market appears to have lost short-term confidence in the company" and that Damstra is focused on sharing "the disappointment in [its] share price performance with other investors".

Not only that, the company reduced its forecasts for FY22 after a series of challenges across the year.

Here are the key takeouts.

What's happening with the Damstra share price?

It's been a difficult year for Damstra shareholders. Since this time in 2020, the Damstra share price has wobbled down from a high of $1.71 and is now at 52-week lows.

Alas, management acknowledged Damstra has faced challenges in 2020/21 that have contributed to the current investor sentiment.

The first major issue related to a contractual dispute with a client acquired through the Vault Intelligence Ltd acquisition. The second came down to "descoping and reduction of service from a global mining client as they internalised their hardware and site access requirements".

Both were "extremely disappointing and adversely impacted [the company's] near-term organic growth outlook". This resulted in adjustments to FY22 guidance.

Damstra downgraded its FY22 revenue guidance and now has its sights on $30 million to $34 million, down from $35.9–$38.9 million.

It also sees an earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 15%–20% after downgrading from 22.5%–25%.

As noted by the company, these changes reflect the minimal contribution from its Newmont business and the UK business for the remainder of FY22. At the lower end of the guidance range, it assumes minimal new client acquisition for the remainder of the financial year.

Damstra also notes that even with its new guidance, FY22 revenue is still expected to grow by 10%–24% and, if Newmont was excluded entirely, underlying revenue growth rate would be expected at 21%–37%.

Despite these headwinds, Damstra reiterated its FY21 results, where it increased sales by 40% to $27.4 million, with 87% of total revenues now annually recurring (ARR). The Damstra share price also fell on the release of these results in August.

As for Q1 FY22, unaudited revenue was $6.2 million, with 87.3% of that ARR. Cash receipts were unaudited $7.7 million and the number of paying users grew to 746,000.

What did management say?

The company also appointed a new CFO today. Andrew Ford will take over as Damstra's chief of finance. He has more than 20 years of experience in similar roles.

Speaking on the announcement, Damstra's executive chairman Johannes Risseeuw said:

Today we have also announced the appointment of Andrew Ford as chief financial officer, commencing in February 2022 based in Melbourne. Andrew has spent the majority of his 20-year career in CFO and senior finance roles, most recently as CFO/finance director for Infrabuild Ltd/GFG Alliance. Prior to this, he was the CFO of ASX-listed Godfreys Group Ltd. Andrew has also held finance positions with Cleanaway Ltd, Skilled Group Ltd, BlueScope Ltd, and professional services firm Deloitte. Andrew graduated with a commerce degree from the University of Melbourne.

The Damstra share price has performed well under the market's expectations these past 12 months, posting a loss of 72% in that time. That's been spurred on by a 71% loss this year to date. Shares are also down 51% in the past month.

The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Damstra Holdings Ltd. The Motley Fool Australia owns shares of and 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.

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