The ELMO Software Ltd (ASX: ELO) share price will be on watch this morning after the company released a business update subsequent to the close of trade yesterday.
ELMO is a cloud-based provider of human capital management software, primarily in Australia and New Zealand. Its integrated product suite covers the entire gamut of an employee’s lifecycle, such as recruiting, onboarding, rostering, payroll, and performance management.
What did ELMO announce?
After the market closed yesterday, ELMO released a trading update in which it provided updated FY20 guidance.
Highlights include the reinstatement of annual recurring revenue guidance to between $55 million and $57 million, and upgraded earnings before interest, tax, depreciation and amortisation (EBITDA) guidance.
FY20 EBITDA guidance has now been set to between negative $2.5 million and negative $4.5 million. This is up from the previously guided range of negative $4 million to negative $6 million.
Meanwhile, revenue guidance remains unchanged at between $50 million and $52 million.
Along with the updated guidance, ELMO revealed it remains well-capitalised with a cash balance of $140.3 million and no debt as of 31 May 2020. The company’s cash reserves have been boosted by a recently completed $72.8 million capital raising. These funds will be used to support organic growth initiatives and acquisition opportunities.
In terms of operations, ELMO noted that staff have been working remotely since 23 March. As such, its operations have continued without disruption. In line with the easing of lockdown restrictions, the company has commenced the re-opening of offices in Australia and New Zealand.
With a shored up balance sheet, ELMO believes it is well-positioned to take advantage of the current market conditions. Widespread remote-based working has created tailwinds for cloud-based software adoption, and there are increased acquisition opportunities in the ANZ region and the UK.
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Cathryn Goh 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.
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