Elmo share price soars on 30% revenue boost and optimistic FY23 guidance

The Elmo share price soared by 17% in early trading today.

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Key points

  • The Elmo share price soared by 17% in early trading after the company released its preliminary unaudited results for FY22 and positive guidance for FY23 
  • Elmo reported a revenue boost of about 30% in FY22 
  • Elmo is expecting to reach breakeven point on its operational cash flow in FY23 

The Elmo Software Ltd (ASX: ELO) share price is flying today, up 17% in early trading before settling.

This follows the software‐as‐a‐service (SaaS) company releasing its preliminary unaudited results for FY22 and positive guidance for FY23.

The Elmo share price opened at $2.63 and is now $2.68, up 10.29%. In earlier trading, it reached $2.85.

Elmo share price up 17% on 'strong' ARR growth

The highlights are as follows:

  • Revenue of $91.4 million, up 32% on the previous corresponding period (pcp)
  • Annual recurring revenue (ARR) of $108.2 million, up 29% compared to 30 June 2021
  • Cash receipts of $116.9 million, up 46% pcp
  • Underlying EBITDA of $7.1 million, up $6.5 million pcp and above the top of the upgraded guidance range
  • $47.9 million cash balance
  • Total operating cash outflow of ($17.4 million), a 34% improvement pcp.

What else happened in FY22?

Elmo offers cloud‐based services to small and medium-sized businesses on an SaaS model to help them manage staff, processes, wages, and expenses.

In its statement, Elmo said the business was starting to 'reap the benefits of scale'.

This follows many years of investment and development not only in the product but also in the team. Elmo was established in 2022.

More small and medium-sized businesses are adopting cloud‐based technology to manage themselves. Platforms like Elmo are particularly relevant in today's age of more people working from home or on a contract basis. This is reflected in Elmo's ARR, which went above the $100 million milestone in FY22.

What did management say?

Commenting on the results, CEO Danny Lessem said:

We are now experiencing the benefits of scale as a result of the many years of growth and investment into the product and team.

The investment phase has been materially completed and the existing cost base will be leveraged through FY23. As a result, underlying EBITDA came in at positive $7.1 million, up $6.5 million pcp.

Our strong brand in the markets we operate, our many years of investment into our product and the increased adoption of people management software, have ensured that we have strong momentum going into FY23.

Despite the broader macroeconomic environment, this momentum is supported by our sales pipeline which underpins our FY23 guidance.

What's next?

Increased operational efficiencies mean Elmo now expects to reach operational cash flow breakeven in FY23.

Elmo's guidance for FY23 is:

  • ARR of $134 million to $140 million with organic growth of 24% to 29%
  • Operating cash flow breakeven
  • EBITDA of $20 million to $25 million.

Elmo also released a business update today. In it, Elmo reports a compound annual growth rate (CAGR) for its ARR of 37% since FY18.

Elmo share price snapshot

The Elmo share price has fallen by 42% in the year-to-date. It hit a 52-week low in late June.

As an ASX tech share, Elmo has been hit hard by the market sell-off in 2022.

The S&P/ASX All Technology Index (ASX: XTX) is down 29% in the year to date.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Elmo Software. The Motley Fool Australia has positions in and has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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