ELMO Software share price jumps higher after strong first half update

The ELMO Software Ltd (ASX:ELO) share price was a strong performer on Wednesday after the release of its first half update…

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The ELMO Software Ltd (ASX: ELO) share price was a strong performer on Wednesday.

The cloud-based HR and payroll software provider's shares ended the day a sizeable 6% higher at $6.90.

Why did ELMO's shares race higher?

Investors were buying ELMO's shares on Wednesday after the release of its first half update.

During the first half ELMO reported statutory revenue of $23.6 million. This was an increase of 33.9% compared to the prior corresponding period.

ELMO's cash receipts for the half came in at $27.4 million. This represents the strongest half in the company's history.

On a rolling 12-month basis, ELMO's cash receipts reached $52.4 million. This was a 40.6% increase on the prior corresponding period.

At the end of the period the company's annualised recurring revenue (ARR) stood at $52 million. Which is a 42.8% increase since the same time a year earlier.

Also growing strongly was its customer numbers. As of the end of December, ELMO's customers had reached 1,478. This is a 30.9% increase over the last 12 months.

ELMO'S CEO and co-founder, Danny Lessem, was very pleased with the half.

He said: "We have had a strong first half in FY20 with the highest half year cash collection in ELMO's history. Our convergent solution continues to gain market traction evidenced by the growing customer base. We are executing on our strategy to increase customer share in the ANZ region and we are successfully cross selling modules across our enlarged customer base."

"The first half was an important investment period for the business on two fronts. Firstly, we continue to invest in additional headcount in each of client services, sales & marketing and research & development. Secondly, we invested into Hero Brands, taking a 50% ownership stake, which provides ELMO with increased research & development capability and increases our capacity," he added.

Pleasingly, Mr Lessem appears confident its strong form can continue.

"Both these investments will drive innovation and expand our valuable customer base, extend our competitive advantage and ensure sustained growth from new and existing customers. Our focus continues to be on delivering organic growth supplemented by strategic acquisitions: laying the foundations for our continued growth momentum in FY20 and beyond."

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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