The Damstra Holdings Ltd (ASX: DTC) share price is surging following the release of its strong quarterly activities report. In morning trade the workplace management solutions shares were up 14.5% to $1.83.
How did Damstra perform in the fourth quarter?
Damstra performed very well in the fourth quarter despite the more negative outlook due to COVID-19. This was seen as users increased over the period, up from 320,000 at the end of FY19 to 404,000. The number of clients also increased by 116% to 279.
Strong performance across the business delivered revenue and other income on an unaudited basis of $22 million, up 38% from FY19. Recurring revenue represented 91% of operating revenue in FY20.
In regards to earnings, EBITDA for FY20 is expected to be $5.6 million. This is ahead of the previously stated guidance and, according to Damstra, demonstrates the delivery of attractive unit economics and strong operating leverage. The operating cash to earnings conversion for FY20 was 93%.
Damstra announced normalised positive operating cash flow of $1.9 million for the quarter, a growth of 760% compared to the prior corresponding period. However, this was down from the $3 million announced last quarter.
Normalised cash receipts also fell from Q3 down $1.6 million to $5.6 million. However, compared to the same quarter last year this result was up 57%.
The company maintains a healthy cash balance of $10.4 million, including the costs of recent acquisitions.
Damstra CEO, Christian Damstra, was particularly pleased with the company’s performance during these trying times, stating:
“Damstra has demonstrated great resilience in these trying times, and we are incredibly pleased with our results, especially the innovation in new products that we have launched to our clients. We see a structural tailwind and, given our resilient business model, we believe we are strategically wellplaced to navigate the disruptions caused by COVID-19. In Australia, strong future growth should be underpinned by future infrastructure investments from federal and state governments as part of post COVID-19 economic policies.”
What now for Damstra?
Damstra continued to demonstrate its importance as a critical business tool during COVID-19, with customers continuing to use its products. There has been increased demand for Damstra’s services across mining, construction, and telecommunications. This has been underpinned by continued product innovation, and new client wins both internationally and in Australia. It is important moving forward that the three businesses acquired during FY20 integrate effectively, with expanded products offering positions to accelerate cross-selling opportunities during FY21.
Finally, investors will be eagerly awaiting the acquisition of Vault Intelligence Limited (ASX: VLT) that was announced earlier this year. It is expected to be concluded by the end of October 2020.
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Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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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