Nasdaq futures are taking a hammering, but this ASX tech share is surging 14%. Here’s why

The Damstra Holdings Ltd (ASX: DTC) share price has been a strong performer on Wednesday.

In afternoon trade, the integrated workplace management solutions provider’s shares are up a massive 14% to 16 cents.

That’s despite Nasdaq futures currently pointing to the tech-focused index opening tonight’s session on Wall Street deep in the red. This follows an underwhelming update from Google parent Alphabet.

Why is the Damstra share price storming higher?

Investors have been buying Damstra’s shares in response to the company’s first quarter update this morning.

According to the release, Damstra delivered a 25% increase in revenue over the prior corresponding period to $7.4 million.

Another positive was that the company was profitable at an EBITDA level, with its EBITDA margin now growing towards the double digits. This has been supported by the company’s cost optimisation plan, which has achieved a run rate of $6.1 million. This represents 76% of its $8 million target.

This helped Damstra report positive operating cashflow of $0.3 million for the period, which was a big improvement on its operating cash outflow $1.7 million a year earlier. Free cash flow was still negative at $1.8 million but almost 50% lower than FY 2022’s average quarterly outflow of $3.4 million.

Damstra’s cash balance stood at $8 million at the end of September, with a further $5 million in funds from its credit facility currently undrawn.

Management commentary

Damstra’s CEO, Christian Damstra, was pleased with the quarter. He said:

Q1 FY23 has been a pleasing start to the financial year, showing continued growth in the business while structurally lowering our cost base. Our targeted improvement in cash burn profile is tracking as planned and we have total confidence we will, at a minimum, reach our $8m cost out target.

It is important to highlight the structural improvement in our cashflow which can be best demonstrated by free cash outflows being $1.8m for the quarter compared to the average quarterly outflow of $3.4m in FY22, which is a 47% improvement. This demonstrates that we have structurally lowered our cost base when coupled with increasing revenue, reinforcing our target of becoming free cash positive in second half of FY23.

The post Nasdaq futures are taking a hammering, but this ASX tech share is surging 14%. Here’s why appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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