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ELMO share price up on FY19 earnings

Sebastian Bowen

The ELMO Software Ltd (ASX: ELO) share price has risen today after the company released its FY19 results and is currently trading for $6.96 per share.

How did Elmo go in FY19?

Elmo reported a strong set of numbers for FY19. Annualised recurring revenue (ARR) grew 47.8% year-on-year (YoY) to come in at $46 million. Pro-forma revenue (including impact from acquisitions) was up 52.2% YoY to $42.6 million. Elmo’s ARR has now achieved a compound annual growth rate of 55.2% since FY17 with 95.4% of FY19 AAR coming from subscription revenue, up from 93.6% in FY18.

Total cash receipts for the year came in at $45.1 million, which was up 58% from FY18. Elmo reports that its bank balance (end of year) is sitting at $27.7 million on top of an operating cash flow of $5.5 million.

Gross profit margin is sitting at 86.6% while customer numbers have increased by 30.1% to 1,341 on top of a 92.1% customer retention rate.

Elmo estimates the lifetime value (LTV) of its customer base has increased from $465 million in FY18 to $621 million in FY19.

Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a loss of $0.9 million

Outlook

Elmo has given FY20 guidance of ARR of $61–63 million, revenue of $53–55 million and EBITDA of $1–3 million, forecasting a continuation of Elmo’s strong growth rates.

The company continues its focus on acquisitions, R&D and broadening its customer base going forward. In FY19, 28.8% of revenue was spent on R&D and this will continue into FY20 to focus on developing new modules as well as enhancing the “functionality and interoperability of the 13 existing modules”.

The acquisitions of HROnboard and BoxSuite were completed in January this year, following the acquisition of Pivot and SkyPayroll during FY18. Together, management expects these acquisitions to “uniquely position ELMO as the only Australian company who can provide a one-stop-shop for cloud HR, payroll and rostering/time & attendance software solution.”

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019