Elmo share price surges after 32% revenue boost

Revenue up, net profit down, and cash flow expected to break-even soon. Investors react to the software company's mixed results.

| More on:
A man and a woman sitting in a technology-related work environment high five each other while the man wears headphones around his neck and the woman sits in front of a laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Elmo Software released its 2022 financial year results today
  • Revenue and EBITDA were all up but net loss also higher
  • Operating cash flow forecast to break even during financial year 2023

The Elmo Software Ltd (ASX: ELO) share price has climbed higher after it reported its full-year results and provided its outlook.

The ASX technology stock surged 5.6% to a $3 high in early trade on Wednesday and has since retreated to now trade at $2.95, up 3.8%.

What did the company report?

What else happened in FY22?

Aside from the launch of new modules for its software suite, the major corporate event for the human resources software provider was speculation that it was to be acquired.

In June, Elmo Software confirmed that it "conducted exploratory discussions" about a non-binding takeover proposal priced at $6.10 per share.

Those negotiations concluded without action, according to the Elmo board.

What did management say?

Elmo Software chief executive Danny Lessem said:

I'm extremely pleased with ELMO's FY22 results. Our group organic growth accelerated as small and medium sized businesses continue to adopt cloud-based solutions to manage an increasingly flexible or hybrid workforce.

We have seen an improvement in our operating metrics across both mid-market and small business segments. A reduction in churn and an improved GP margin resulted in a substantial increase in the lifetime value of our customer base to $1.1 billion. This is a 75% increase on FY21.

What's next?

Unlike many ASX companies this reporting season, Elmo Software has provided some guidance for the 2023 financial year:

  • Annualised recurring revenue to grow 24% to 29% ($134 million to $140 million)
  • Revenue to grow 25% to 31% ($114 million to $120 million)
  • EBITDA to approximately triple to a range of $20 million to $25 million
  • Operating cash flow to end up between negative $2 million and positive $2 million

According to Lessem, "increased operational efficiencies" from scale would see the business reach breakeven for operational cash flow during the current financial year.

"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," he said.

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

Elmo share price snapshot

Like most technology stocks, the Elmo share price has been on a wild ride in 2022.

From November to July, it lost more than 60%. It has since rallied to be 34.7% down year-to-date.

The market capitalisation sits at around $263 million.

Motley Fool contributor Tony Yoo has positions in Elmo Software. 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.

More on Earnings Results

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »

A young man sitting at an outside table uses a card to pay for his online shopping.
Consumer Staples & Discretionary Shares

Why is the Kogan share price crashing 12%?

Profits are down at this ecommerce company during the second half.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Resources Shares

Guess which ASX 200 mining stock is sinking 7% following its quarterly update

Let's see how this miner performed during the third quarter.

Read more »