Here’s why the Damstra (ASX:DTC) share price is surging 13% today

The software-as-a-service provider’s share price is having a great start to the week.

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Key points

  • The Damstra share price is up nearly 13%
  • The comany’s quarterly revenue increased 16% in Q2 of FY22
  • It achieved customer wins in Australia and New Zealand

The Damstra Holdings Ltd (ASX: DTC) share price is on the rise today on the back of the company’s quarterly results.

Damstra provides software-as-a-service solutions to industries around the globe. At the time of writing, the company’s shares are swapping hands at 31 cents, up 12.73%.

Let’s take a look at what the company’s Q2 FY22 results revealed.

Damstra share price in the green amid results

Highlights of the company’s unaudited results include:

  • Quarterly revenue increased 16% on the previous quarter to 7.2 million
  • Cash receipts of $7 million quarterly
  • Operating cash outflows $7.3 million, down 22% from $9.4 million in the first quarter of FY22
  • Half-yearly revenue for FY22 up 16% on the prior corresponding period (PCP)
  • Revenue guidance of $30-$34 million for FY22 confirmed
  • Annual recurring revenue up 15% on PCP to $27.8 million

What else happened in the quarter?

Damstra attributed its improved quarterly revenue to acquiring new clients and achieving customer wins in Australia and New Zealand.

The company said another positive was its partnership with TechnologyOne. That business segment has now grown to 18 clients and Damstra is hoping to expand this partnership into the UK market.

Damstra acquired 30 new clients in total for the quarter with a total customer base of 73. Of these client contracts, none of the top 10 is due for renewal in FY22.

Damstra is also rolling out a work permit software solution to a global commercial real estate services company.

The company completed a $20 million capital raise in December to support its sales and investment internationally.

Management comment

Commenting on the results, Damstra chief executive officer Christian Damstra said:

This improved performance was due to increased activity and client wins in ANZ, and we believe in this quarter some of our international opportunities will also eventuate.

We have successfully completed our capital raise in December to strengthen our balance sheet and have sufficient capital to return to positive operating cash flows, whilst continuing to grow internationally, particularly in North America.

We have seen an increase in ANZ activity as we continue to make good progress with a number of international client opportunities, and we were pleased to provide solutions to many of our clients as they managed tracking and monitoring through the ongoing disruption from COVID-19.

What’s next for the company?

Damstra also revealed its revenue for the third quarter to date is higher than revenue at the same point in Q2.

The company plans to continue to reduce its operating cash outflows while increasing revenue. Damstra’s announcement claimed its Australian operations were a stand-out performer, despite the company not breaking down the results on location.

Damstra is also in final contract discussions with a global mining client in North America. It’s expecting a decision from this client before the end of March.

Share price recap

The Damstra Holdings share price has dropped almost 9% since the start of 2022 and more than 76% over the past 12 months.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned 5.54% in the past year.

The company has a market capitalisation of about $80 million based on its current share price.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Damstra Holdings Ltd. The Motley Fool Australia owns 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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