Damstra share price soars 26% following ‘breakthrough quarter’

A person smashes a wall with a hammer, sending bricks flying.A person smashes a wall with a hammer, sending bricks flying.

The Damstra Holdings Ltd (ASX: DTC) share price rocketed 26% today following the release of the company’s report for the June quarter.

After opening 10.5% higher at 21 cents, the workplace management solutions provider’s stock surged to trade at an intraday high of 26.5 cents – representing a 39% gain. At market close on Monday, the Damstra share price finished at 24 cents, a rise of 26.32% from the previous close.

Damstra share price takes off on positive cash flow

  • $8 million of unaudited revenue – the highest quarterly revenue of financial year 2022 (FY22)
  • The company has now reported three consecutive quarters of revenue growth
  • $1.3 million of operating cash flow – first quarter of positive cash flow in FY22
  • The company boasted 953 clients at the end of June – a 12.5% quarter-on-quarter improvement

A strong June quarter’s performance saw Damstra’s revenue for the second half increase 25.2% on the first half of financial year 2022.

The company’s operating cash flow ended in the green. However, when also considering investing outflows, it reports an outflow of $1.2 million. That was an improvement on the March quarter’s $4.7 million outflow.

The ASX tech company ended the quarter with $10.1 million in cash and $5 million of undrawn funding.

What else happened in the last quarter?

Damstra’s bottom line improved through the June quarter, but its share price wasn’t so lucky. The stock tumbled 42% last quarter despite news of a three-year agreement with Barrick Gold worth at least US$1.2 million.

The company also signed a three-year agreement with Capstone Copper alongside smaller North American client wins expected to help drive its international expansion.

Finally, the company’s cost optimisation project is now targeting savings of $8 million, up from $5 million in April.

Around half of those savings had been realised on a run rate basis at the end of June. It’s expecting to achieve its final target by the end of the December quarter.

What did management say?

Damstra CEO Christian Damstra commented on the results driving the company’s share price higher today:

Q4 has been a breakthrough quarter for Damstra in many ways… our international business is now showing the benefits of our significant investment and we believe Damstra has the critical mass to grow at scale.

We continue to see a growing sales pipe of opportunities in [Australia and New Zealand] but also internationally.

Our much-improved cash flow outcomes are pleasing in the current environment, with a material and structural reduction in cash outflows in Q4.

What’s next?

Damstra hasn’t provided guidance for FY23 just yet, but there is good news regarding its outlook.

The company believes it will be free cash positive in the second half of this financial year as long as markets don’t materially decline between then and now. It noted its focus on free cash flow, rather than operating cash flow, will likely meet investors’ focus on the net cash position of technology companies.

Damstra share price snapshot

The Damstra share price has underperformed through 2022 so far.

It has slumped 29.4% year to date. It’s also currently 78.9% lower than it was this time last year.

For context, the S&P/ASX All Technology Index (ASX: XTX) has fallen 28.5% since the start of the year and 26% over the last 12 months.

The post Damstra share price soars 26% following ‘breakthrough quarter’ appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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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