Annual
Report
2019
ELMO Software Limited
ACN 102 455 087
Contents
Large and growing addressable market
CEO message
The ELMO numbers and track record
ELMO at a glance
2
4
6
8
10 Business model
12 Company history
16
22
23
24 Recent acquisitions
26 Our people
28 Environment, social and governance
30 Board of Directors
The ELMO solution
Industry partnerships
Strong organic growth strategy
Financial statements
32 Key Management team
34 Director’s report
43 Remuneration report
56 Auditor’s independence declaration
58
62 Notes to the financial statements
95 Director’s declaration
96
101 Shareholder information
104 Risk management
106 Glossary
IBC Corporate directory
Independent auditor’s report
AGM Details
ELMO Software Limited (ELMO) advises that it will hold its
2019 Annual General Meeting on Tuesday, 26 November at 2pm
(Sydney time) at the ELMO office, Level 27, 580 George Street, Sydney.
ELMO ANNUAL REPORT 2019 ELMO IS ONE OF
AUSTRALIA AND
NEW ZEALAND’S
ONLY INTEGRATED
CLOUD HR, PAYROLL
AND ROSTERING /
TIME & ATTENDANCE
SOLUTIONS
1
ELMO ANNUAL REPORT 2019 Large and growing addressable market
ELMO’s market opportunity has grown to 23,813 organisations
and a ~$2.4bn opportunity in ANZ
ANZ Total Addressable Market (TAM)
50+ employee organisations1,2,3
ANZ market potential
~23,813 organisations2
Total addressable market
~$2.4b
Larger market opportunity:
• New lower-mid market opportunity (50 to
200 employee organisations) provides an
additional 13,210 organisations to ELMO’s
addressable market
• Product suite has grown from 7 modules focusing
on talent management at IPO in June 2017 to
13 modules which now also includes HR Admin,
Payroll, Rostering / Time & Attendance
Extended product suite by adding Payroll
and Rostering / Time & Attendance:
• Enhanced competitive advantage from a
broader suite
• Increased potential of sales to new customers
• Additional cross-sell opportunity from existing
customers
Market penetration
~5.6% organisations with
average of 2.4 out of 13 modules
Large opportunity for growing
customer base and increasing
module saturation of existing
customer base
1. Frost & Sullivan independent market report 2019
2. TAM includes organisations from 50 to 200 employees (lower mid-market) across Talent Management, HR Core, Payroll and Rostering / Time & Attendance
3. Assumes full penetration of ELMO modules across all organisations
2
ELMO ANNUAL REPORT 2019 Expansion of our product suite
We have built a leading integrated cloud HR, Payroll,
Rostering / Time and Attendance solution
Pay
Engage
Hire
Retain
Develop
Payroll
Core HR
Recruitment
Performance
Management
Learning
Management
Self-Service
HR Survey
Onboarding
Rewards &
Recognition
Course Builder
Rostering / Time
& Attendance
Pivot
Remuneration
Course Library
Modules added during:
FY17
FY18
FY19
Succession
Management
Grown from 7 to
13 modules since
June 2017
Rostering / Time &
Attendance added in
January 2019
Proven ability to
cross-sell modules to
existing customers
Developing additional
functionality based on
customer needs
3
ELMO ANNUAL REPORT 2019
CEO message
Dear Shareholder,
We are pleased to report that FY19 was
a record year for ELMO Software Limited
(ELMO).
We continued to deliver on our growth
strategy and we are strengthening our
position as the leading cloud, software-
as-a-service (SaaS), human resource (HR),
payroll and rostering / time & attendance
provider in Australia and New Zealand.
ELMO develops, sells and implements
software solutions that enable
organisations to efficiently manage and
automate the stages of human capital
management (HCM) processes and
functions in an employee’s life cycle from
“hire to retire”, including pay. Our market
leading convergent platform solution now
consists of 13 modules spanning across
people, process and pay.
We provide a unified, intuitive, user-
friendly, single dashboard solution for
recruitment, onboarding, performance
management, learning and development,
pre-built courses, succession planning,
remuneration, HR surveys, employee
administration (HR core) and payroll.
Rostering / time & attendance was added
in January 2019 with the acquisition
of Get BoxSuite Pty Ltd (“BoxSuite”),
unlocking a new and complementary
~$426 million market1.
In FY19 we delivered strong financial
results, achieving record annualised
recurring revenue2 (ARR) of $46.0 million,
up 47.8% on FY18. Our organic SaaS ARR
grew 38.1% during the year.
Sustained sales momentum has grown
our customer base by 30% to 1,3413
with an estimated lifetime value of
$621 million, adding $156 million
of incremental value in 12 months.
Customer retention4 remains consistently
high at 92% and the module penetration
per customer has steadily grown to 2.45.
Over 95% of our revenue is subscription-
based, which is recurring in nature.
Our customer retention5 in dollar terms
was 110.8% in FY19, highlighting the
successful cross-selling of our enlarged
suite of solutions into our sticky customer
base. We have supplemented this
growth with two selective and strategic
acquisitions to broaden our offering with
complementary technology and / or a
high quality customer base, all of which
enhance our cross-sell potential.
Other FY19 highlights include:
• Achieved updated pro forma
revenue guidance
• Statutory revenue of $40.1 million
• Record annual cash receipts of
$45.1 million
• High gross profit margin of 86.6%
• 265 organic, new customers added
• 165 product enhancements
In line with ELMO’s growth strategy,
we invested significantly in FY19 across
sales & marketing resources, technology
capability and client implementation to
take full advantage of the large market
opportunity at hand. In addition, we’ve
grown our company from 193 ELMOnians
in FY18 to 277 in FY19.
We continue to lay the foundations for
long term, sustainable growth. Our total
addressable market opportunity is
large and has grown substantially from
~$1.7 billion to ~$2.4 billion through
increased visibility on the opportunities in
the lower mid-market6 and increasing the
product suite of our convergent solution.
We are organising and allocating our
resources purposefully to optimise our
results in these markets.
With roughly 5.6% market share based on
customer numbers and scope to increase
the number of modules per customer
(currently 2.4 out of a potential 13),
there is substantial cross-sell potential
and considerable scope for growth for
some time to come. We see increasing
traction from both new customers and
throughout our loyal customer base with
our recent acquisitions.
The outlook for 2020 is exciting and
builds on our 2019 investments and
success. We will continue to target
further investment in 2020 to deliver
long-term, sustainable growth.
We expect to increase headcount,
capabilities, technology development,
sales and marketing resources and
actively seek strategic investment
opportunities for complementary,
adjacent technology or customer lists
that provide cross-sell opportunities.
We are confident these investments will
generate strong, long-term returns for
shareholders as we take full advantage
of the wider view we now have of the
market.
To support our growth strategy, in
September following the close of FY19,
we successfully completed a $55 million
institutional placement and Share
Purchase Plan (SPP) to raise new capital.
We are pleased to report the offer was
well supported and we welcome our new
investors to ELMO.
Our guidance for FY20 assumes strong
ARR growth to $61-63 million, revenue
growth to $53-55 million and EBITDA
expected to be ($1-3) million.
ELMO is fortunate to have a deeply
experienced management team that
continues to successfully execute our
accelerated growth strategy and deliver
on expectations.
We would also like to thank our
customers for their much appreciated
and continuing support, and all our
shareholders for their loyalty. We look
forward to sharing our successes and
exciting future with you.
Yours sincerely,
Danny Lessem,
Co-founder and CEO
1. Frost & Sullivan independent market report 2018
2. June 2019 subscription revenue annualised. Subscription revenue was formerly referred to as “SaaS revenue”
3. As at 30 June 2019
4. Customer retention is calculated by dividing the number of customers in the current period who were active customers at the end of the prior period by the
number of customers at the end of the prior period
5. Customer dollar retention is calculated by dividing the incremental ARR in FY19 by the ARR spend in FY18 of the same customer cohort
6. Lower mid-market represents companies with <200 employees
4
ELMO ANNUAL REPORT 2019 “WE CONTINUE TO LAY
THE FOUNDATIONS
FOR LONG-TERM,
SUSTAINABLE
GROWTH.
Annual Recurring Revenue (ARR)
$46.0m
FY18 $31.1m
Total statutory revenue
$40.1m
FY18 $26.5m
“47.8% growth
in ARR from
FY18”
5
ELMO ANNUAL REPORT 2019 The
numbers ...
Strong growth in annualised recurring revenue1 up 47.8% from FY18
$46.0m
Annualised recurring revenue
(ARR)1
Up 47.8% growth in ARR from FY18
$42.6m
FY19 pro forma revenue2
$40.1m FY19 statutory revenue
up 51.2% on FY18
86.6%
Gross profit margin
High gross profit margin
1,341
Customers as at 30 June 2019
Customers increased 30.1% since 30 June 2018
92.1%
Customer retention3
110.8% customer dollar retention4,
net of churn
$621m
Lifetime value (LTV) of customer base
at 30 June 20195
Up $156m from $465m at
30 June 2018 on an ARR basis
NEW PRODUCT
OFFERINGS6
TECHNOLOGY
ENHANCEMENTS
ACQUISITIONS6
WORKFORCE
AWARDS
Rostering /
Time & Attendance
165 product
enhancements6
HROnboard
BoxSuite
277 employees7
Deloitte Tech Fast 50
Aus Smart50 – Top
Innovator Stevie –
Computer software
company of the year
1. June 2019 subscription revenue annualised. Subscription revenue was formerly referred to as “SaaS revenue”
2. Pro forma revenue includes the full year impact of FY19 acquisitions
3. Customer retention is calculated by dividing the number of customers in the current period who were active customers at the end of the prior period by the
number of customers at the end of the prior period
4. Customer dollar retention is calculated by dividing the incremental ARR in FY19 by the ARR spend in FY18 of the same customer cohort
5. LTV is calculated by multiplying the average ARR per customer over the past 12 months by gross profit margin (%) divided by revenue churn
6. Up to 30 June 2019
7. As at 30 June 2019, includes HROnboard and BoxSuite (BoxSuite)
6
ELMO ANNUAL REPORT 2019
Building on our track record
Statutory revenue and ARR ($m)
Annual customer receipts ($m)
Statutory revenue1
ARR
46.0
40.1
ARR
CAGR
55.2%
31.1
26.5
19.1
16.6
CAGR
57.1%
58%
$45.1
54%
$28.6
$18.3
FY17
FY18
FY19
FY17
FY18
FY19
Subscription revenue2,3 %
93.3%
93.6%
95.4%
Customer numbers
Employees
1,341
1,031
277
193
254
106
FY17
FY18
FY19
FY17
FY18
FY19
1. Statutory revenue includes professional services and other income
2. Subscription revenue was formerly referred to as “SaaS revenue”
3. Subscription revenue % is the proportion of subscription revenue of total statutory revenue
7
ELMO ANNUAL REPORT 2019
ELMO at a glance ...
“A LEADING
PROVIDER OF
CLOUD HR, PAYROLL,
ROSTERING / TIME
& ATTENDANCE
SOFTWARE IN
AUSTRALIA & NEW
ZEALAND (ANZ)
ONE vendor
ONE dashboard
ONE user-experience
Australia
ELMO is one of Australia and
New Zealand’s leading providers
of integrated cloud human resources
“HR”, payroll and rostering / time
& attendance software solutions
ELMO’s SaaS, cloud-based platform provides organisations with a centralised
approach to managing an employee’s lifecycle from ‘hire to retire’
including payroll and rostering / time & attendance
1. As at 30 June 2019
2. Frost & Sullivan independent market report
8
ELMO ANNUAL REPORT 2019 ELMO employs 2771 people across
6 offices in Australia and New Zealand
New
Zealand
Snapshot1
277 employees
6 Offices throughout the ANZ region
Customer base of 1,341 organisations
Scalable SaaS cloud-based platform
ANZ = regional focus
ANZ Total Addressable Market $2.4bn2
ELMO at a glance
ELMO’s industry agnostic customer base – consisting of more than
1,300 organisations spread over multiple, varied different industries – all benefit
from of our convergent solution that is developed and maintained in-house by the
Australian and New Zealand ELMO team. Local knowledge and support has been
a key part of ELMO’s ongoing success and today over 270 employees in 6 offices
across Australia and New Zealand work tirelessly to ensure customer expectations
are met and exceeded.
ELMO primarily targets lower-mid market (50-200 employees) and mid-market
organisations, who stand to benefit by automating their HR, payroll and
rostering / time & attendance operations with ELMO’s constantly evolving suite
of 13 integrated modules. Customers can also gain access to a library of over
400 eLearning courses covering a broad range of compliance, soft skills and
technical skills – all of which are updated and curated by the local team.
9
ELMO ANNUAL REPORT 2019 Business model
Wider view of the market
opportunity
ELMO’s cloud HR, payroll and rostering
/ time & attendance software solutions
and business model have been primarily
built to address the HCM requirements
of organisations ranging from 50 - 2,000
employees. During FY19, ELMO’s
modular product offering increased to
13 with the acquisition of BoxSuite, a
rostering / time & attendance solution.
This acquisition and our increased focus
on the lower-mid market increased
the market opportunity available from
~$1.7 billion to $2.4 billion1. During FY19,
ELMO invested in fully commercialising
this new opportunity by adopting a
relevant sales and marketing strategy
and adapting the solution to be user-
friendly and intuitive for this lower
mid-market group.
In addition, the HROnboard acquisition
in January 2019, provided ELMO with an
expanded customer base in the HCM
space and provides a significant scope to
cross-sell ELMO’s extensive SaaS offering.
Currently, most SaaS HR & payroll
providers that offer a unified solution
target large enterprise and government
organisations. The HR & payroll solutions
offered by these providers are typically
costly to implement, require significant
time investment and involve complex
integration processes, making such
solutions unsuited in addressing the HCM
requirements of mid-market and lower
mid-market organisations. Consequently,
mid-market and lower mid-market
organisations have limited HR solution
options and many existing solution
providers only address a single vertical of
the various HR functions.
In addition, the payroll landscape in this
market is primarily dominated by legacy
providers. As a result, ELMO believes a
large underserviced market has emerged,
which is growing as organisations
increasingly recognise the strategic
importance of HR & payroll and the
need to adopt an efficient and scalable
cloud solution. ELMO believes these
organisations require more flexible and
cost-effective HR, payroll and rostering
/ time & attendance solutions that can
be delivered on shorter sales cycles, with
simpler implementation processes than
those currently provided by HR & payroll
solution providers who are typically
focused on larger enterprises. ELMO
is well placed to take advantage of the
market opportunity by having the widest
convergent platform in the region.
Multi-jurisdictional and
industry agnostic
Thanks to a multi-jurisdictional and
industry-agnostic platform, ELMO’s
cloud HR, payroll and rostering / time &
attendance solutions have been designed
to be scalable on an international basis.
ELMO currently provides solutions to
customers based principally in Australia
and New Zealand; however, the platform
can be translated into nearly any language
and is multi-jurisdiction compatible.
ELMO is industry agnostic in the
deployment of its HR, payroll and
rostering / time & attendance solutions.
ELMO HR & PAYROLL SOFTWARE SOLUTIONS IS INDUSTRY AGNOSTIC
Construction and mining
Hospitality
Professional services
Education
Finance
Industrials
Information technology
telecommunications and media
Property
Retail
Government
Logistics
Healthcare and
pharmaceuticals
Not for profit
Revenue generation
ELMO generated over 95% of its FY19 statutory revenue from subscription revenue for its HR & payroll software solutions.
Typically, customers enter into three-year contracts with ELMO for access to its solutions. It is customary for ELMO to be paid
annually in advance by the customer, with revenue recognised evenly over the 12 months of the contract. The amount of the
annual fee is dependent on the number of modules subscribed to by the customer and the number of users on the platform.
In addition to subscription revenue, ELMO also generates revenue from charging professional service fees for providing non-
standard implementation, configuration, training and integration services, as well as other revenue including government grants.
1. Frost & Sullivan independent market report 2019
10
ELMO ANNUAL REPORT 2019 % of FY19
statutory
revenue
~95%
Customer
Subscription
revenue
Revenue model
Revenue recognition policy
Description
SaaS subscription
fee
ELMO’s subscription revenue is
recognised evenly on a monthly
basis. The balance of the revenue
received in advance is categorised
as a liability (referred to as deferred
income).
Professional
services fees
~5%
Consultation or
integration fees
ELMO’s professional service fees
are recognised as revenue once
delivery of the required services
is completed
ELMO typically receives an annual fee,
payable in advance over the term of
the contract.
Amount of fee varies depending on
the number of modules subscribed
for and the number of users on the
platform.
Customers are invoiced on an annual
basis throughout the term of the
contract.
ELMO receives a professional service
fee associated with providing any ad-
ditional implementation, configuration
and integration services as well as other
services.
Fees are typically invoiced during the
first year of the contract
Amount of fee varies depending on the
level of service provided and complexity
of the process.
Attractive cash flow profile
ELMO’s attractive financial and cash flow profile is supported by the high subscription revenue, strong customer retention rates
and favourable payment terms as a result of the Company’s SaaS-based revenue model with long term contracts paid annually in
advance, as explained below.
High subscription revenues
ELMO has a high proportion of revenue that is classified as recurring in nature (subscription revenue), as shown below, which is a
result of the subscription-based revenue model.
ELMO’S SUBSCRIPTION REVENUE AS A PERCENTAGE OF TOTAL STATUTORY REVENUE
93.3%
93.6%
95.4%
FY17
FY18
FY19
From FY17 to FY19, ELMO has consistently achieved more than 90% in subscription revenue. In FY19, 95.4% of ELMO’s statutory
revenue was recurring in nature, reflecting the SaaS business model and the Company’s focus on subscription revenue.
11
ELMO ANNUAL REPORT 2019
Company history
Learning
Management
System
Pre-Built
Courses
Performance
t
c
u
d
o
r
P
Course Builder
eLearning
platform and
customised
content
Commenced
development
of full suite
of talent
management
solutions
2002
2013
Focus on customer
orientated training
solutions
ELMO founded in
2002 by Danny Lessem
and Manuel Garber
i
s
p
h
s
r
e
n
t
r
a
p
/
s
r
e
m
o
t
s
u
C
12
2011
2012
2014
Focused on
mid-market
organisations
Australian Human
Resources Institute
Approved supplier
on Government
Panel arrangements
164
Customers
As at
30 June 2014
ELMO ANNUAL REPORT 2019 Recruitment
Succession
HR Core
Rewards
and
Recognition
Rostering
/ Time &
Attendance
Onboarding
Remuneration
Listed
June 29 2017
2015
Began expansion
into New Zealand
2016
2017
2018
2019
Acquisition of
Techniworks
Acquisition of
HROnboard
UTS/ELMO
Partnesrship
Acquisition of
SkyPayroll
Acquisition of
PeoplePulse and
LiveSalary
Acquisition of
Pivot Software
Acquisition of
BoxSuite
254
Customers
As at
30 June 2015
358
Customers
As at
30 June 2016
524
Customers
1,031
Customers
As at
30 June 2017
As at
30 June 2018
1,341
Customers
As at
30 June 2019
13
ELMO ANNUAL REPORT 2019
UNLOCK THE
POTENTIAL
OF YOUR
ORGANISATION
Leading integrated cloud HR, payroll and
rostering / time & attendance platform
14
ELMO ANNUAL REPORT 2019 Pay
Engage
Hire
Offer self-service
functionality to managers
and employees and provide
real-time access to payroll
and personal data from
anywhere, anytime, on
any device
Carry out core HR
functions, including the
ability to process and
approve leave, timesheets
and retrieve pay slips,
and ensure HR initiatives
are optimised with
employee surveys
Set your new hires up for
success from the start
by streamlining talent
identification, recruitment
and onboarding processes
Retain
Develop
Improve retention by
capturing performance
feedback to identify star
performers, manage career
development plans and align
compensation accordingly
Keep skills compliant
and up-to-date with
personalised learner plans,
access to pre-built courses
and the ability to customise
learning content
15
ELMO ANNUAL REPORT 2019 The ELMO solution
ELMO provides a suite of cloud HR, payroll and rostering / time & attendance
software solutions that aim to address and automate key HCM activities and
pay processes. ELMO’s software modules cover all stages of an employee’s lifecycle,
from ‘hire to retire’. Our modules can be used together or stand alone and are
configurable to an organisation’s unique processes and workflows.
Leading integrated cloud HR and payroll solutions
Pay
Engage
Hire
Retain
Develop
Payroll
Core HR
Recruitment
Performance
Management
Learning
Management
Self-Service
HR Survey
Onboarding
Rewards &
Recognition
Course Builder
Rostering / Time
& Attendance
Remuneration
Course Library
Succession
Management
16
ELMO ANNUAL REPORT 2019 Pay
Easily manage essential people-management functions relating to
pay, leave and rostering / time & attendance, while empowering
employees to update personal records in their own time.
Ensure accurate and compliant workforce management
Effective workforce management, which ensures employees are in the right place at the right time and then paid accordingly,
remains a key challenge for employers. ELMO’s Pay suite helps employers optimise shift coverage, control costs and minimise risks
associated with overwork/fatigue and incorrect Award/EA interpretation. They can also maintain and keep track of payroll data
for all employees, ensuring they are paid accurately while meeting single touch payroll (STP; AU), payday filing (NZ), and other
legislative obligations.
ELMO’s Pay suite also offers self-service functionality. Managers gain access to historical data, ensuring more informed decision-
making, while employees can swap shifts, make leave requests, check leave balance, and review payslips. The end result is more
efficient workforce management and less administrative burden on HR teams.
Payroll
Enhanced compliance – Ensure all
legislative obligations are met with ELMO
Payroll. A single touch payroll (STP) &
SuperStream solution, compliant in AU, and
payday filing & KiwiSaver compliant in NZ.
Flexible pay cycles – Manage employees
across one or multiple payroll cycles, with
flexibility to run standard or ad-hoc payroll
at any time.
Reporting and analysis – Extract, analyse
and accurately reconcile payroll, easily
compare variance reports to identify
anomalies and ensure accuracy from
one pay cycle to the next.
Self-Service
Leave management – Create leave
requisition and authorisation workflows.
Organisation charts – Provide an overview
of an organisation’s structure and reporting
relationships.
Employee self-service – Empower
employees to access and update personal
information, request leave and access pay
slips and pay summaries from any device,
anywhere and at any time.
Manager self-service – Empower managers
to access employee information, approve
leave requests and view team analytics from
any device, anywhere and at any time.
Rostering /
Time & Attendance
Roster staff – Utilise the intuitive calendar
to schedule weekly, fortnightly or monthly
staff rosters. Account for staff availability,
leave requests or special events to ensure
optimal staff coverage.
Time tracking – Benefit from an automatic
and stress-free time tracking solution with
real-time reporting. Gather data to help
control staffing costs and ensure employees
are paid correctly.
Compliance risk management – Use
ELMO’s powerful Business Rules Engine
and Award Library to ensure all compliance
obligations relating to Modern Awards or
Enterprise Bargaining Agreements are met.
17
ELMO ANNUAL REPORT 2019 Engage
Save time, money and resources by automating HR administrative
tasks, and gain greater insights into HR effectiveness and the
employee experience with ELMO’s Engage suite.
Transform the management and engagement of your workforce
From chasing up leave forms, to managing staff absences and extracting information from disparate software systems, organisations
can lose valuable time and productivity when burdened with heavy administrative tasks to support the HR function. HR Core
provides a central location for all employee data, while employee self-service and manager self-service functionality empowers staff
to find, update and use information anywhere, anytime.
Just as critically, employees who are motivated and feel their voices are heard can result in higher engagement levels. ELMO Survey
allows leaders to create, manage and analyse workforce surveys, with access to benchmark data for more context. By embedding
surveys across the employee lifecycle, HR can assess employee sentiment, identify strengths, weaknesses, risks and opportunities,
and address them early.
HR Core
Leave management – Create leave
requisition and authorisation workflows.
Organisation charts – View an
organisation’s structure including roles,
reporting relationships and profile details
with tiered access.
Employee self-service – Empower
employees to access and update personal
information, request leave and access pay
slips and pay summaries from any device,
anywhere and at any time.
HR Survey
Integrated or stand-alone solution –
Collect feedback across all ELMO modules
directly or from external sources.
Benchmark survey templates – Access a
library of best practice templates including
onboarding, engagement, pulse, NPS,
etc. Benchmark results against other
organisations.
Powerful insights – Obtain powerful and
meaningful insights from collected data by
using ELMO Survey reporting.
Manager self-service – Empower managers
to access employee information, approve
leave requests and view team analytics from
any device, anywhere and at any time.
18
ELMO ANNUAL REPORT 2019 Hire
From attracting top talent, to getting them up to productive
speed quicker, creating a personalised candidate experience
has never been easier thanks to ELMO’s Hire suite.
Win the war for top talent
Reducing the time to hire and increasing the time to productivity are key metrics used to assess the effectiveness of talent
acquisition strategies – yet these are difficult to achieve without the right tools. ELMO’s Hire suite transforms end-to-end
recruitment and onboarding processes by streamlining workflows, automating tasks and empowering managers and employees.
ELMO Recruitment ensures the right first impression is made by creating a memorable candidate experience – an experience that
is seamless, quick and intuitive. Employers benefit from one centralised system that integrates with job boards and allows users to
create talent pools. The positive experience continues with ELMO Onboarding. Personalise the onboarding experience for each
candidate, digitise and submit documents, and link new hires to training opportunities.
Recruitment
Job requisition – Select the required
job position, add specific requirements,
alert recruitment managers, track
and monitor progress, and customise
approval workflows.
Onboarding
Personalised onboarding webpage –
Present company information and videos,
create guidelines for the onboarding
process, provide an onboarding task list,
and give team member introductions.
Talent pool – Search existing employees,
search the candidate database, match job
criteria, and rank candidates.
Job posting – Integrate with job boards,
social media, preset posting rules, and
track costs.
Branded careers webpage – Embed a
careers page within a corporate website,
customise branding, incorporate company
media, and post jobs automatically.
Workflows and approvals – Configure
onboarding processes and select
stakeholders, prerequisites, time delays,
and conditions.
Electronic forms – Create configurable
forms, utilise the document upload
facility, and benefit from integrations with
the Australian Taxation Office and other
third parties.
19
ELMO ANNUAL REPORT 2019 Retain
Holding onto top talent has never been more critical. Create a
memorable employee experience and reduce staff turnover rates
with ELMO’s Retain suite of solutions.
Become a talent magnet
Any list of employee “must-haves” will include fundamentals like a clear career trajectory, regular performance feedback, the right
level of remuneration, and appropriate rewards & recognition. Thanks to technology, it’s now possible to ensure employees are
presented with best practice approaches to all these areas, and a whole lot more.
ELMO’s Retain suite enables managers to check in regularly with employees about their performance, build personalised
development plans, and to reward and recognise employees for key achievements and milestones. Employers can also identify
successors for mission-critical roles and provide career paths for high potential employees. Just as critically, HR and managers are
given greater oversight and control of remuneration processes and budgets – all while accessing centralised data to coordinate
retention efforts.
Rewards &
Recognition
Employee recognition –
Recognise peers and
high performers with
recommendations, configurable
badges and points. Integrates
with ELMO Performance.
Configurable trophies –
Acknowledge employee
milestones, significant
achievements or celebrations
with automated assignment
of trophies.
Awards – Set-up workflows to
allow employee nominations
and voting for internal awards.
Remuneration
Streamline remuneration
processes – Easily manage
the end-to-end remuneration
allocation and approvals
process.
Succession
Management
Ensure business continuity –
Determine role criticality,
identify high performers and
mitigate flight risk.
Managers empowered –
Make more informed decisions
about the allocation of salary
increases, bonuses & equity
awards.
Link salary planning with
ELMO suite – Combine
performance data with
remuneration strategies to align
employee performance and
remuneration.
Employee career progression –
View succession pathways,
identify skills gaps and create
development plans.
Foster strategic succession –
Match high potential employees
to critical roles and compare
candidate suitability by skills,
performance, potential and
aspirations.
Performance
Management
Tailored performance
appraisals – Configurable to
any organisation’s requirements,
including goal setting
capabilities, competency
models, development plans,
and 360 reviews.
Manager team view – Access
direct and indirect reports to
view the status of appraisals,
utilise the search facility or
collaborate using the export and
print functions.
Configurable reports –
Generate reports at the click of a
button, enabling users to choose
appraisals for comparison,
use graphs for visual display,
access appraisal status updates,
export to Excel and/or PDF, and
automate report emails.
20
ELMO ANNUAL REPORT 2019 Develop
Keeping employee skills relevant and compliant has never been
more critical. ELMO’s Develop product suite can help create a
culture that embraces continuous learning.
Create the workforce of the future
Tracking and managing the end-to-end training needs of an organisation is only possible with technology. ELMO Learning
Management smooths the process with one easy-to-use system. This helps HR stay on top of course completion rates, ensures
compliance, accelerates employee performance, and supports organisational goals by facilitating blended learning – helping
employers coordinate both eLearning and instructor-led training
Today’s workforce also expects engaging learning content. eLearning has become the primary way of delivering workplace
education, due to the ability to learn from anywhere at any time. ELMO Course Library provides access to over 400 eLearning
regularly updated courses covering everything from soft skills to compliance-related issues. ELMO Course Builder simplifies
the creation of bespoke online learning, from course development to publication – all without the need for coding experience.
Course Builder
Create courses – Insert images/movies, edit
text, record voice-over, and use interactive
features (buttons, rollovers, hotspots, etc.).
Create assessments – Select question
type (multi-choice, true/false, drag and
drop), insert images/voice-over, randomise
questions, and set pass mark.
Preview, review and publish – Build
courses with real-time editing, send
courses to reviewers for feedback, and
publish to ELMO Learning or a SCORM
compliant LMS.
Course Library
An ever-expanding library – Provide access
to ELMO’s Course Library, which offers over
400 courses with a wide range of content,
including compliance, soft skills and
productivity training.
Customised course content – Copy and
tailor content to a specific organisation’s
needs with easy authoring tools built with
“what you see is what you get” editing.
Deep integration with ELMO Learning –
Quickly and easily publish courses with
detailed response tracking for in-depth
reporting.
Learning Management
Learner’s view – Generate personalised
learning plans, including eLearning
courses and instructor-led training (ILT),
and create policy acknowledgements and
assessments. Integrates with ELMO Survey
for learning feedback.
Course catalogue – Course self-selection,
search facility, configurable enrolment rules,
access to over 400 pre-built eLearning
courses.
Manager team view – Access direct and
indirect reports, view current status of
learning, use the search facility, and export
and print reports.
Configurable reports – Generate reports
at the click of a button, enabling users to
choose courses for comparison, view graphs
for visual display of course completion rates,
export to Excel and/or PDF, and automate
report emails.
21
ELMO ANNUAL REPORT 2019 Industry partnerships
ELMO continues to build on its deep relationships with peak industry
bodies across Australia and New Zealand. This heightens ELMO’s ability to
access a broader prospective customer base, increases industry recognition as
a thought leader, and enables ELMO to work closely with industry stakeholders
to not only enhance current solutions, but to develop new solutions to meet
the evolving needs of the market. Here are just two examples of ELMO’s
involvement with peak industry bodies:
AHRI also provide members with access
to ELMO’s pre-built content library via
their online portal and a HR Certification
Program designed to advance the
HR profession within Australia, held
quarterly at ELMO’s headquarters. “We
don’t just do that with anybody. That’s
a totally different, unique engagement
opportunity,” Hegarty says.
Winning the war on
talent: the RCSA-ELMO
Partnership
ELMO has been in partnership with
the Recruitment, Consulting and
Staffing Association (RCSA) – the peak
association for the Australian and New
Zealand recruitment industry – since
2015. RCSA has over 3000 corporate
and individual members who can access
education, research and business
advisory support. ELMO’s sponsorship
of key events and the provision of ELMO
technology and content via the RCSA
online portal offers exposure and brand
awareness to potential clients working in
the recruitment industry.
“ELMO plays an essential role in the
RCSA member experience. For three
years we have utilised ELMO for
education and compliance matters within
our membership base, particularly with
our Code of Conduct. The RCSA Code
for Professional Conduct, authorised
by the Australian Competition and
Consumer Commission, is the benchmark
of professionalism in the recruitment
and staffing sector. By hosting the RCSA
Code of Professional Conduct, ELMO
assists in ensuring that our members
uphold the highest standards of ethics
and honourability in their business
practice. In addition to our Code, ELMO
is an essential part of our Learning &
Development offering. Our suite of
courses, hosted on ELMO, are embraced
and heavily utilised by our membership”.
John Towey, Head of Marketing and
Business Solutions, RCSA.
Built on trust: the
AHRI-ELMO Partnership
ELMO has worked in partnership with
AHRI, Australia’s peak HR industry
association, since 2013. This partnership
ultimately helps both entities improve
the productivity, innovation and vitality
of Australian workplaces. ELMO also
gains unprecedented exposure to AHRI’s
20,000+ HR industry members through
a series of national networking forums
and conferences, including the industry’s
largest annual events: the AHRI Awards,
recognising excellence in HR; and the
flagship AHRI National Convention &
Exhibition. “Our members know the
ELMO brand, they know what ELMO
brings, and they see that consistently,
year after year. That adds value.” Dean
Hegarty, General Manager, Commercial,
Member Services & Marketing.
Australian HR Institute.
Stronger
together
RELATIONSHIPS WITH THE
INDUSTRY PEAK BODIES
IN AUSTRALIA AND
NEW ZEALAND
“ELMO HAS FORGED DEEP
22
ELMO ANNUAL REPORT 2019 Strong organic growth strategy
Accelerated with selective acquisitions for
complementary technology and /or customer lists
+
New customers in
existing markets
and new market
segments
• 265 organic new
customers added
during FY19
Greater usage
from existing
customers
Expand and
enhance
product line
Growth through
acquisitions
• Consistently high
• Acquired and
customer retention,
92.1% in FY19
• Total customer
• Strong customer
base of 1,341 as at
30 June 2019
dollar retention1, net
of churn of 110.8%
• Incremental ARR of
$5.3 million from
existing customers
• Increased multi-
module new business
sales with the average
modules per new
customer of 3.7 for
FY19
• Increase penetration
and adoption in lower
mid-market
• Investment in sales
and marketing to drive
new customer wins
across ANZ
integrated rostering
/ time & attendance
modules
• Spent 28.8% of FY19
statutory revenue on
R&D2
• Increased R&D
investment in order
to develop new
modules and enhance
functionality and
interoperability of the
13 existing modules
• Completed acquisitions
of HROnboard and
BoxSuite
• Actively seeking
strategic investments,
primarily for
complementary
technology, to
augment ELMO’s
value proposition, or
for customer lists that
provide module cross-
sell opportunity
• Disciplined approach,
with strong track record
and significant resource
and management
expertise to complete
integrations successfully
and deliver synergy
benefits
1. Customer dollar retention is calculated by dividing the incremental ARR in FY19 by the ARR spend in FY18 of the same customer cohort
2. Includes both expensed and capitalised research and development costs
23
ELMO ANNUAL REPORT 2019 Recent acquisitions
Broadening ELMO suite and increasing market share
Onboarding
Rostering / Time & Attendance
HROnboard is one of Australia’s leading specialist providers
of cloud-based employee onboarding software. HROnboard
has successfully built a high quality and loyal customer base of
131 organisations, which is continuing to grow. HROnboard and
ELMO’s customer base have minimal cross over and therefore
provides an attractive cross-sell opportunity for ELMO’s
extended product suite.
• Rapid growth of recurring SaaS revenue, averaging over 40%
annually over the last three years
• High quality revenue stream with SaaS revenues accounting
for ~97% of total revenues
• Strong and loyal customer base of 131 organisations
operating across a wide range of industries, who have
demonstrated retention rates of ~93%
BoxSuite is a SaaS, cloud-based specialist in workplace
rostering and time & attendance (including award
interpretation for calculation of pay rates) for casual and
shift-based employees.
Large new market opportunity with over 5.92 million casual
and shift-based employees across Australia and New Zealand,
which represents a ~$426 million market. It is estimated that
approximately 60% of the casual and shift-based employee
market is managed through the use of manual processes1.
BoxSuite brings cost advantages compared to organic
in-house development, as well as earlier realisation of the
commercial benefits that an enlarged product suite offers.
BoxSuite’s modules are a natural adjacency to ELMO’s
existing HR & Payroll platform and provides a suitable
solution for ELMO’s existing customers who employ casual
and shift-based employees.
This uniquely positions ELMO as the only Australian
company who can provide a one-stop-shop for
cloud HR, payroll and rostering / time & attendance
software solutions.
Completed 31 January 2019
Completed 31 January 2019
Targeted acquisitions to supplement strong organic growth
Acquisitions performing as per expectations and integration on track
1. Frost & Sullivan independent market report
24
ELMO ANNUAL REPORT 2019 “THIS UNIQUELY POSITIONS
ELMO AS THE ONLY
AUSTRALIAN COMPANY
WHO CAN PROVIDE A
ONE-STOP-SHOP FOR
CLOUD HR, PAYROLL
AND ROSTERING /
TIME & ATTENDANCE
SOFTWARE SOLUTIONS.
25
ELMO ANNUAL REPORT 2019 Our people
One
team
united
26
ELMO ANNUAL REPORT 2019 277 ELMOnians
across 6 offices
in Australia and
New Zealand
27
ELMO ANNUAL REPORT 2019 Environment, social and governance
ELMO is focused on
building a culture and
environment that sustains
our ELMOnians as
people, engages them
as part of a team and
encourages them to
innovate and thrive.
Growing our ELMOnians
The ELMO team is growing both
organically and through acquisitions
across Australia and New Zealand. ELMO
has expanded geographically to support
our people and clients to have offices in
Sydney, Melbourne, Perth, and Brisbane,
in addition to Auckland and Christchurch.
On 1 July 2018, we had 97 ELMOnians
move into our new ELMO HQ in the
heart of Sydney’s CBD, and in July
2019 we have 212 ELMOnians thriving
in productive space and community
activities. We have a focus on maximising
our employee value proposition through
engagement, wellbeing and helping
them to become the best version of
themselves.
We believe ELMO is an awesome place
to be, because our ELMOnians are just
that…AWESOME! The diversity of skills,
experience, cultures and attributes that
each ELMOnian brings and shares each
day creates a rich cultural health. We
embrace their uniqueness and personal
contributions to help make ELMO a great
place to work.
The ELMOnian employee
value proposition (EVP)
ELMO’s leaders are working with each
division to ensure we introduce activities
and initiatives that focus on supporting
and growing our ELMOnians and help
to attract the right people to join the
team. As a part of our EVP we are
focusing on activities that engage, inspire
and ignite our ELMOnians to sustain
them as human beings. That means, in
addition to compensation and benefits,
we also provide:
• Challenging and meaningful work
• Opportunity for personal achievement
• Amazing and engaging organisational
culture
• Career development.
Corporate Social
Responsibility (CSR)
ELMO is committed to being actively
involved in worthy causes within every
community in which we are located.
Our CSR activities target what matters
most to our ELMOnians; the goal is to
deliver initiatives they care about, while
also supporting the wider Australian
community and contributing to Australian
economic development.
This year ELMO supported:
• Youth Off The Streets
• RSPCA Million Paws Walk
• Movember
• Dry July
• MS Swimathon
• MS Rideathon
• Steptember
• United Against Domestic Violence
• Cancer Council’s Biggest Morning Tea
• RUOK Day morning tea.
ELMOnian Wellbeing
and Engagement
ELMO prides itself on caring for the
health and wellbeing of our ELMOnians.
It is a gift that we offer to our teams to
ensure health and wellbeing programs
not only have a positive impact on the
wellbeing of ELMOnians, they also lead
to significant increase in ELMOnian
engagement, cohesiveness and overall
productivity.
Our employee engagement and welfare
survey provided fresh insight to the
needs, feelings and “mood” of our
ELMOnians. We are constantly listening
to develop a multitude of engagement,
community and wellbeing programs
being explored and implemented. Some
of these include:
• Yoga
• Mindful Meditation
• Toastmasters
• City2Surf
• Hackathons
• End of month and quarterly milestones
• Morning teas and shared lunches
• Flexible working arrangements
• Job sharing
28
ELMO ANNUAL REPORT 2019 • Healthy food initiatives
• Gratitude practice including badges,
employee and CEO awards.
Our diverse programs are delivered
throughout the year with the goal of
improving the mind and body – and
ultimately enhancing the work satisfaction
and performance – of all ELMOnians.
In addition, our Employee Assistance
Program (EAP) offers free short-term
counselling designed to help ELMOnians
prevent or resolve personal, family and
workplace problems affecting their
wellbeing and job performance.
and management teams, and we also
believe in building the strength of all
our teams. This year HR has established
a dedicated learning and development
function to identify and develop our
emergent leaders, build individual and
team skills and knowledge, and plan
for succession activities. In support
of this we are working to build our
management team to coach, counsel,
mentor and model design thinking,
continuous improvement, accountability,
responsibility and clear communication.
This ensures our ELMOnians are
supported and empowered to grow in
their roles and prepare for future roles.
Toastmasters
ELMO Melbourne and Sydney
Toastmasters Club continues to
evolve, with new Toastmasters Pathway
program. We have new ELMOnians
joining the team fortnightly and open
the meetings to guests. We have seen
enormous success with the Toastmasters
program helping to build relationships,
communication and leadership
skills across the business. Through
Toastmasters our ELMOnians are
encouraged to listen and answer, to plan
and lead, to give feedback and to accept
it, thereby becoming more effective
communicators and leaders.
Professional
Development
ELMO recognises that organisation-
wide learning and development starts
at the top. We are dedicated to the
sustained growth of the business through
development of our senior leadership
To support individual and team
development, ELMO invests in various
development opportunities, some of
which are listed below:
• AHRI National Convention and
State Conferences
• National and State HR Summits
• HR & L&D Tech Fest
• HR Leaders’ Summit
• ReimagineHR
• Third Sector Live
• Women in Leadership
• Toastmasters
• Sydney University Centre for
Continuing Education short courses
• AHRI short courses
Environment
With ELMO’s continued growth, we are
looking for opportunities to improve
our operations and build a long-term,
sustainable business. Over time,
ELMO will move its operations to work
environments that have a NABERS rating.
We have supported office environmental
sustainability and established the
ELMO Green Team, an ELMOnian led
committee to education and monitor
ELMO commitment to a sustainable
environment.
Policy and Security
As a part of ELMO’s commitment to
information security for the business
and clients, ELMO undertook ISO
27001:2013 accreditation for the ELMO
and Pivot businesses this year. It was
an ambitious 9-month timeline with
27001:2013 certification achieved in
July 2019, with no non-conformances.
ELMO has invested in our Quality
Management System and streamlining
policies and processes designed to
support business activity and enable the
ELMO to operate in a productive, safe
and agile manner.
Corporate Governance
ELMO takes a deliberate and
focused approach to corporate
governance. Our compliance with the
Corporate Governance Principles and
Recommendations of the ASX Corporate
Governance Council is described in
our Corporate Governance Statement,
which is available from our website:
https://investors.elmosoftware.com.au/
Investors/?page=Corporate-Governance
29
ELMO ANNUAL REPORT 2019 Board of Directors
Danny Lessem
CO-FOUNDER AND CHIEF EXECUTIVE OFFICER
Barry Lewin
INDEPENDENT NON-EXECUTIVE CHAIRMAN
Founded ELMO in 2002
Joined ELMO in 2018
Mr Danny Lessem is the CEO, Executive Director and
co-founder of ELMO. Member of the Audit and Risk
Management Committee.
Danny is responsible for leading the development and
execution of the Company’s long term strategy and delivering
on growth objectives for the business. Danny also plays a
key part in the day-to-day management of the Company’s
operations and has been critical to the success of ELMO,
including the strategy underpinning the development of the
Company’s full suite of talent management software solutions.
Danny has extensive experience in the technology industry
having led SaaS companies for over 15 years in senior roles,
including Compu Technologies where he was the CEO
and was responsible for overseeing the transition of the
Company’s primary business from a digital agency to an
eLearning content provider. Danny holds a Bachelor of Laws
(LL.B.) and Bachelors of Arts and Law from the University of
Witwatersrand, South Africa.
Mr Barry Lewin is non-executive Chairman of ELMO,
having been appointed to the position on 10 October 2018.
Barry is the founder and Managing Director of Melbourne-
based corporate advisory firm SLM Corporate Pty Ltd
where he advises public and private companies on mergers,
acquisitions, transaction structuring, debt and equity issues,
business sales and on all aspects of corporate governance.
Prior to establishing SLM Corporate in 1999, Barry spent
12 years as an in-house counsel to a number of ASX-
listed companies.
Barry is non-executive Chairman of ASX-listed Praemium
Limited (ASX:PPS), Quick Fee Limited (ASX:QFE), and has
held previous directorships at ASX-listed Senetas Corporation
Limited (ASX:SEN) and Clean TeQ Holdings Limited
(ASX:CLQ), where he also served as Chairman of the Audit
Committee.
He has degrees in Commerce and Law and holds an
MBA from Swinburne University.
30
ELMO ANNUAL REPORT 2019 Kate Hill
INDEPENDENT NON-EXECUTIVE DIRECTOR
Leah Graeve
INDEPENDENT NON-EXECUTIVE DIRECTOR
Joined ELMO in 2018
Joined ELMO in 2019
Ms Kate Hill is an independent Non-executive Director of
ELMO, Chair of the Audit and Risk Committee and member
of Nomination and Remuneration Committee. She has over
20 years’ experience as an audit partner with Deloitte Touche
Tohmatsu, working with ASX listed and privately owned
clients. She has worked extensively in regulated environments
including assisting with Initial Public Offerings, capital raising
and general compliance, as well as operating in an audit
environment.
Kate is also Chair of Seeing Machines Limited (AIM:SEE), an
independent Non-executive Director of CountPlus Limited
(ASX:CUP) where she serves as Chair of the Audit and Risk
Committee and is a member of the Acquisitions Committee.
She is the Company Secretary of Kazia Therapeutics Limited
(ASX:KZA, Nasdaq: KZIA). She held a variety of leadership
and executive roles in Deloitte and served for a period on the
Board of Partners of the Australian firm.
Kate holds a Bachelor of Science (Hons) from Bristol
University, is a member of the Institute of Chartered
Accountants in Australia and New Zealand, and a graduate of
the Australian Institute of Company Directors.
Ms Leah Graeve is a Non-Executive Director of ELMO and
Chair of the Remuneration and Nomination Committee. Leah
has enjoyed a career as a successful commercial and contracts
negotiator in a range of organisations and industries over the
past 16 years.
Leah is currently a senior executive at Qantas Ltd, where she
is Senior Manager, Contracts, IT & Digital. She is also a Board
member of the not-for-profit Rare Cancers Australia. Leah
previously held roles as Qantas Group Head of Procurement
– IT & Digital, Senior Manager at Jetstar Airways, Legal
Counsel at Engonet, and IT Commercial Manager at BHP
Group Limited.
She holds a Bachelor of Arts & Law from Monash
University and is a graduate of the Australian Institute of
Company Directors.
31
ELMO ANNUAL REPORT 2019 Key Management team
Samuel Sun
CHIEF TECHNOLOGY OFFICER
Darryl Garber
CHIEF COMMERCIAL OFFICER
Joined ELMO in 2010
Joined ELMO in 2011
Mr Samuel Sun is the Chief Technology
Officer (CTO) of ELMO and joined the
Company in 2010. Samuel has over
10 years of experience in software
development roles.
As CTO at ELMO, Samuel is responsible
for setting the overall direction for the
organisation’s software and technology,
and manages the strategy, architecture,
engineering, design, governance and
information security functions of ELMO’s
solutions and platform.
Prior to joining ELMO as a Research
and Technical Development Manager,
Samuel was a Lead Developer at
Scholani Education College and a
Software Developer at IBM.
Samuel holds a Masters in Information
Technology from the University of NSW
and a Bachelor of Telecommunication
Engineering from Tongji University, China.
Mr Darryl Garber is ELMO’s Chief
Commercial Officer (CCO). Darryl joined
ELMO in 2011 and has over 8 years of
experience in roles encompassing business
development, marketing, corporate
finance, management and strategy.
As CCO, Darryl’s core objective is to
develop, evaluate and execute ELMO’s
growth strategy. This includes pursuing
and driving merger & acquisition activities,
securing financing, launching go-to-market
products and investigating new markets.
Darryl is also responsible for ELMO’s
investor relations activities.
Darryl played a critical role during
ELMO’s 2017/18 period of expansion
by acting as project lead for the IPO
and subsequent capital raising. His past
experience working across a number of
ELMO departments has been invaluable
during this transformative period. Darryl is
adept at managing rapid change, scaling
operations and driving strategy.
Darryl holds a Graduate Diploma in
Applied Finance from Kaplan University and
an MBA (Dean’s List) from Bond University.
Monica Watt
CHIEF HUMAN
RESOURCES OFFICER
Joined ELMO in 2015
Mrs Monica Watt is General Manager
Human Resources at ELMO. Monica has
over 10 years of experience working
across Compliance and Human
Resource roles.
Monica is responsible for optimising the
business performance through innovation
and people engagement and elevating
team performance through innovative
leadership. Monica has a broad range
of experience in leading organisational
transformations, driving large scale
growth, talent acquisition, leadership
development, and succession planning.
Prior to joining ELMO, Monica was
previously Senior Compliance Manager
at Open Colleges and Instructional
Designer for SkillsDMC, Transpacific
Industries and TAFE NSW. She is
also currently appointed as Officer
Commanding of 204 Army Cadet Unit,
Timor Barracks, Dundas, and holds the
rank of Captain (AAC) in the Australian
Army Cadets.
32
ELMO ANNUAL REPORT 2019 James Haslam
CHIEF FINANCIAL OFFICER
Gordon Starkey
CHIEF OPERATING OFFICER
Joined ELMO in 2019
Joined ELMO in 2010
Mr James Haslam is the CFO of ELMO
and joined the company in February
2019. James is a Chartered Accountant
with over 18 years of experience in
accounting and financial roles.
As CFO, James is responsible for all
aspects of the accounting and finance
function, from ensuring efficient,
controlled and timely recording and
reporting systems, to budgeting,
forecasting and cash flow analysis.
Before joining ELMO, James founded
Financial Agility Consulting a consultancy
practice providing senior executive
management support through mergers,
acquisitions, capital raisings and IPO’s.
Prior to Financial Agility Consulting,
James worked for both KPMG and
Deloitte providing professional services
advice, predominantly in respect of
mergers, acquisitions and IPO’s.
James holds a Bachelor of Science
in Engineering and Business from the
University of Warwick in the UK and is
a Fellow of the Institute of Chartered
Accountants in England and Wales.
Mr Gordon Starkey is the COO of
ELMO and joined the Company in 2007.
Gordon has extensive experience across
enterprise SaaS solutions, including
roles with responsibilities across general
management, business development,
product design, financial management
and strategy.
Gordon is responsible for overseeing
ELMO’s business development, sales
and marketing, product and client
services. Gordon is essential to driving
the strategic direction of the Company
and managing partnership alignment
with ELMO’s customers.
Prior to joining ELMO as an eLearning/
LMS Consultant, Gordon served in
various teaching, consulting and research
roles at Macquarie University.
Gordon holds a Bachelor of Business
Administration (Hons) and a Bachelor of
Psychology from Macquarie University.
Danny Lessem
CEO, EXECUTIVE DIRECTOR
AND CO-FOUNDER
Founded ELMO in 2002
Mr Danny Lessem is the CEO,
Executive Director and co-founder of
ELMO. Member of the Audit and Risk
Management Committee.
Danny is responsible for leading the
development and execution of the
Company’s long term strategy and
delivering on growth objectives for the
business. Danny also plays a key part in the
day-to-day management of the Company’s
operations and has been critical to the
success of ELMO, including the strategy
underpinning the development of the
Company’s full suite of talent management
software solutions.
Danny has extensive experience in the
technology industry having led SaaS
companies for over 15 years in senior roles,
including Compu Technologies where
he was the CEO and was responsible for
overseeing the transition of the Company’s
primary business from a digital agency to
an eLearning content provider. Danny holds
a Bachelor of Laws (LL.B.) and Bachelors
of Arts and Law from the University of
Witwatersrand, South Africa.
33
ELMO ANNUAL REPORT 2019 Directors’ report
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the
‘consolidated entity’) consisting of ELMO Software Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities
it controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were directors of ELMO Software Limited during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Barry Lewin (appointed 10 October 2018)
James McKerlie (resigned 19 September 2018)
Danny Lessem
Trevor Lonstein (resigned 4 February 2019)
Kate Hill
Leah Graeve (appointed 12 June 2019)
Dividends
No dividend was paid during the financial year ended 30 June 2019 (2018: $nil).
Operating and financial review
Principal activities
ELMO is one of Australia and New Zealand’s leading providers of software-as-a-service (SaaS), cloud-based human resources and
payroll solutions.
ELMO’s human resources (HR) and payroll management software solutions enable organisations to manage the lifecycle of an
employee from hire to retire on a single integrated platform. The Company develops, sells and implements a range of modular
software applications to efficiently manage HR and payroll related processes including recruitment, onboarding, performance
management, learning and development, rewards and recognition, remuneration, succession planning, payroll, onboarding,
workplace rostering, time and attendance.
ELMO also provides HR Core, a software module which organisations use for people management and employee self-service, and
HR Survey for internal staff and external customer surveys. ELMO’s solutions assist organisations to better address and adapt to the
complexities of the human capital management (HCM) industry while increasing their productivity and reducing costs.
Significant changes to the business
During the year ended 30 June 2019 the following acquisitions were made by the Group:
HROnboard
On 31 January 2019 the Company completed the purchase of HROnboard Pty Limited (HROnboard), one of Australia’s leading
providers of cloud-based employee onboarding software for an estimated total consideration of $10.0m with an initial amount of
$7.0m paid on completion and a deferred cash payment of $3.0m (see note 21). The vendor is eligible for an additional conditional
cash payment (estimated to be $5.5m) which will be subject to achieving a range of certain high growth performance targets.
Total consideration payable is subject to adjustments relating to cash, debt and working capital.
The onboarding process is an essential function of the employee’s lifecycle within an organisation and the acquisition of
HROnboard strategically strengthens ELMO’s position as a leading provider of SaaS onboarding solutions in the Australian market.
Goodwill arising on the acquisition reflects potential cost synergies, enhanced market coverage from a broader module suite and
the increased opportunities for cross-selling to both new and existing customers.
34
ELMO ANNUAL REPORT 2019 BoxSuite
On 31 January 2019 the Company completed the purchase of Get BoxSuite Pty Limited (BoxSuite), a SaaS, cloud-based specialist in
workplace rostering and time and attendance for casual and shift-based employees, for a total consideration of $1.4m with an initial
amount of $1.0m paid on completion and $0.4m deferred based on agreed development milestones.
BoxSuite’s rostering module enables organisations to schedule shifts and monitor staff costs while its time and attendance modules
enable organisations to efficiently record and manage employee hours, calculate appropriate remuneration rates, and seamlessly
integrate with external payroll platforms.
The acquisition of BoxSuite is firmly in line with ELMO’s growth strategy to supplement the Company’s strong organic growth with
complementary technology to offer customers an integrated product suite of HR and payroll solutions.
Review of operations during the year
Certain financial information in the review of operations section below referencing Statutory Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) has been derived from the audited financial statements. The Annual Recurring Revenue
(ARR), pro forma EBITDA, pro forma revenue and pro forma operating expenses are non-IFRS financial information and as such have
not been audited in accordance with Australian Accounting Standards.
For the full year ended 30 June 2019, ELMO reported statutory revenue of $40.1m (FY2018: $26.5m). ELMO’s statutory loss before
income tax, finance expenses, depreciation and amortisation was $2.5m (FY2018: earnings of $1.0m) and its statutory net loss after
tax was $13.2m (FY2018: loss $3.0m).
Annual recurring revenue, which reflects the revenue run rate at a point in time and is considered a key leading metric for
prospective revenue, increased to $46.0m at 30 June 2019 (30 June 2018: $31.1m). Growth in ARR was driven by a combination of
new contracts and the contribution from the FY19 acquisition of HROnboard and BoxSuite.
Pro forma financial performance
For the full year ended 30 June 2019, ELMO’s pro forma revenue was $42.6m (FY2018: $31.8m), which was consistent with market
guidance of $42.4m. ELMO’s pro forma loss before income tax, finance expenses, depreciation and amortisation was $0.9m
(FY18: earnings $3.5m), which was ahead of market guidance of negative $1.6m.
The pro forma financial information reflects ELMO’s statutory financial statements adjusted for:
• estimated full year revenue and EBITDA contribution from acquisitions, assuming the date of ownership was from 1 July in the
respective years; and
• adjustments relating to acquisition related transaction costs and other non-recurring items.
The acquisition revenue and EBITDA adjustments relate to the following acquisitions:
• Quintessential Marketing Consulting, Sky Payroll and Pivot Software during FY18; and
• HROnboard and BoxSuite during FY19.
Pro forma revenue
The growth in pro forma revenue during the period was driven by:
• Strong subscription revenues of 95.4% of total revenue and high customer retention rates of 92.1%;
• Expansion of ELMO’s customer base to 1,341 organisations compared to 1,031 at 30 June 2018 (30.1% increase);
•
Increased investment into ELMO’s sales and marketing team;
•
Increased investment and traction in new and existing modules, resulting in increased cross-sell and upsell opportunities
amongst ELMO’s customer base; and
• Enhanced brand awareness and reputation of ELMO and its product offering.
35
ELMO ANNUAL REPORT 2019 A reconciliation between revenue based on the statutory accounts and pro forma revenue is provided below.
Reconciliation of revenue
Revenue based on statutory accounts
Add/(less) net effects of:
Other income
Full year estimated impact of acquisitions
Pro forma revenue
Year ended
30 June 2019
$m
Year ended
30 June 2018
$m
40.1
26.5
–
2.5
42.6
0.1
5.2
31.8
Pro forma EBITDA
For FY19, ELMO reported pro forma operating expenses, excluding depreciation and amortisation of $43.5m (FY18: $28.3m).
The key driver for the increase in operating expenses was ELMO’s continued investment in resources to underpin future growth.
There was increased investment into:
• ELMO’s sales and marketing function which reported pro forma expenses of $18.8m (FY18: $9.2m, reflecting a 104.3% increase
compared to pro forma FY18 due to increased headcount during the year;
•
•
Increased investment and capacity in client services up to $5.5m (FY18: $2.7m). The increased investment was focussed on
supporting the increase in activity covering implementation, integration and training;
Increased investment in research and development, primarily the development of new modules and enhancement of existing
modules. Pro forma research and development spend totalled $11.7m through FY19 (FY18: $5.0m). The total spend in FY19 was
split between operating expenses of $3.4m and capitalised expenses of $8.3m (FY18: $0.8m, $4.2m); and
• An increase in pro forma general and administrative expenses to $15.8m (FY18: $15.6m) driven by an increase in employment
and operating costs due to the strengthening of ELMO’s infrastructure to scale operations.
A reconciliation between EBITDA based on the statutory accounts and pro forma EBITDA is provided below
Reconciliation of EBITDA
EBITDA based on statutory accounts
Add/(less) net effects of:
Full year estimated impact of acquisitions
Acquisition related costs
Other non-recurring items
Pro forma EBITDA1
Year ended
30 June 2019
$m
Year ended
30 June 2018
$m
(2.5)
0.4
0.6
0.6
(0.9)
1.0
0.9
1.2
0.4
3.5
1. Pro forma EBITDA in the year ended 30 June 2019 reflects the application of AASB16 Leases which results in certain leases being reclassified as
finance leases. This accounting treatment requires the applicable lease to be capitalised on the balance sheet and the expenses reflected within
depreciation and interest costs (below EBITDA). Pro forma EBITDA year ended 30 June 2018 reflects the leases as operating leases with the rent
expense included within EBITDA.
36
ELMO ANNUAL REPORT 2019Directors’ report Financial position
As at 30 June 2019, ELMO has no debt and a net cash balance of $27.7m (2018: $46.0m). The primary reason for the decline in the
cash balance through FY19 was $13.2m of acquisition related payments.
ELMO’s underlying strong cash position was driven by the payment of annual license fees in advance, which contributed to the
positive operating positive cashflow of $5.5m through FY19.
Due to growth through acquisitions, intangible assets have increased to $58.9m (2018: $35.8m (note 15)).
As a result of the above, the Directors believe the consolidated entity is in a strong and stable position to expand and grow its
current operations.
Business growth strategy and likely developments
• Greater usage from existing customers
ELMO aims to increase usage of its solutions amongst the existing customer base by encouraging customers to subscribe
to additional modules. ELMO plans to support this via further investment into sales and marketing and broadening its talent
management software offering.
•
Increasing market penetration in Australia and New Zealand
ELMO currently has a market penetration of circa 5.6%, reflecting the ratio of 1,341 active customers from a total market of
23,813 organisations2, across Australia and New Zealand. ELMO plans to accelerate its market penetration in the region by
increasing investment into its sales and marketing capabilities and initiatives to drive new customer wins.
• Expand product offering
ELMO recently acquired and integrated rostering, onboarding and time and attendance modules to expand its solutions.
There is continuous development and deployment planned for new and enhanced features across both the newly acquired and
existing modules with additional modules aimed to be launched within the next few years.
ELMO continues to commit to investment in research and development with the total spend in FY19 reflecting 28.8% (FY18:
18.9%) of statutory revenue. Key development plans include the continued enhancement of the user experience and user
interface, continued integration of the FY19 acquisitions and further development of the interoperability of the module suite.
• Acquisitions
ELMO continues to believe there are opportunities to gain additional market share and/or acquire complementary technology
through targeted acquisitions of other HR management software companies.
Matters subsequent to the end of the financial year
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
2
Frost & Sullivan independent market report 2019.
37
ELMO ANNUAL REPORT 2019 Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Barry Lewin (appointed 10 October 2018)
Chairman and Independent Non-executive Director
Bachelor of Commerce (B.Com) and Bachelor of Laws (LLB) from University of Cape Town,
MBA, Swinburne University of Technology.
Barry is the founder and Managing Director of Melbourne-based corporate advisory firm
SLM Corporate Pty Limited, where he advises public and private companies on mergers,
acquisitions, transaction structuring, debt and equity issues, business sales and all aspects
of corporate governance. Prior to establishing SLM Corporate in 1999, Barry spent 12 years
as an in-house counsel to a number of ASX-listed companies.
Other current directorships:
Non-Executive Chairman of Praemium Limited (ASX:PPS), Non-Executive Chairman of
Quickfee Ltd (ASX:QFE).
Former directorships (last 3 years):
None
Special responsibilities:
Member of the Nomination and Remuneration Committee
Interests in shares:
Interests in options:
Contractual rights to shares:
Name:
Title:
Qualifications:
Experience and expertise:
10,000 fully paid ordinary shares
None
None
James (Jim) McKerlie (resigned 19 September 2018)
Former Chairman and Independent Non-executive Director
Bachelor of Economics (B.Ec) and a Diploma in Financial Management from the University
of New England. He is a fellow of the Institute of Chartered Accountants, Australian
Institute of Company Directors and Institute of Management Consultants.
Jim has over 30 years of experience across digital, media, technology, energy and
professional services industries. Jim has held senior roles as Partner in Charge at Deloitte
Touche Tohmatsu, Managing Partner at KPMG, Chairman of onthehouse.com.au, Executive
Chairman of Bullseye and Chairman of Acer Energy and Ambassador Energy.
Other current directorships3:
Chairman of Bambu Digital. Independent Non-Executive Director of Beach Energy.
Former directorships (last 3 years):
Chairman of Manalto Limited, Lithium Consolidated Minerals Exploration Limited and
Drillsearch Energy prior to it being acquired by Beach Energy (BPT.ASX).
Special responsibilities:
Chairman of the Nomination and Remuneration Committee and Member of the Audit and
Risk Committee (until resignation on 19 September 2018).
Interests in shares:
Interests in options:
Contractual rights to shares:
None at 30 June 2019
None
None
3. Directorships current at the time of resignation.
38
ELMO ANNUAL REPORT 2019Directors’ report Name:
Title:
Qualifications:
Experience and expertise:
Danny Lessem
Chief Executive Officer, Executive Director and Co-Founder of ELMO
Bachelor of Laws (LL.B) and Bachelor of Arts and Law from the University of Witwatersrand,
South Africa
Danny is responsible for leading the development and execution of the Company’s long
term strategy and delivering on growth objectives for the business. Danny also plays a key
part in the day-to-day management of the Company’s operations and has been critical
to the success of ELMO, including the strategy underpinning the development of the
Company’s full suite of talent management software solutions.
Danny has extensive experience in the technology industry having led SaaS companies for
over 15 years in senior roles, including Compu Technologies where he was the CEO and
was responsible for overseeing the transition of the Company’s primary business from a
digital agency to an eLearning content provider.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Audit and Risk Committee
Interests in shares:
Interests in options:
Contractual rights to shares:
Name:
Title:
Qualifications:
Experience and expertise:
11,989,816 fully paid ordinary shares
None
None
Trevor Lonstein (resigned 4 February 2019)
Former Chief Financial Officer and Executive Director
Bachelor of Commerce (B.Com) in Accounting and Finance from University of Cape Town,
South Africa and a Fellow of the Institute of Chartered Accountants in England and Wales.
Trevor was responsible for all aspects of the accounting and finance function, from ensuring
efficient, controlled and timely recording and reporting systems, to budgeting, forecasting,
and cash flow analysis.
Prior to joining ELMO, Trevor owned and operated Adrite Digital Colour Printing and
held senior roles as Senior IT Project Manager at Allens Arthur Robinson, Ships Financial
Controller at Orient Cruise Lines – MV Marco Polo and a career of over eight years in
auditing with Deloitte Touche Tohmatsu’s member firms in England and Australia.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Nomination and Remuneration Committee (until resignation on 4 February
2019).
Interests in shares:
Interests in options:
420,695 fully paid ordinary shares
31,373 options
Contractual rights to shares:
None
39
ELMO ANNUAL REPORT 2019 Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Catherine (Kate) Hill
Independent Non-Executive Director, Chair of the Audit and Risk Committee
Bachelor of Science – Honours, Mathematics and Statistics from the University of Bristol,
England, a member of the Institute of Chartered Accountants in Australia and New
Zealand, and a graduate of the Australian Institute of Company Directors.
Kate has over 20 years’ experience as a former audit partner with Deloitte Touche
Tohmatsu, advising privately owned and small cap ASX listed clients. She has worked
extensively in regulated environments including assisting with Initial Public Offerings,
capital raising and general compliance, as well as operating in an audit environment.
She also held several leadership positions within Deloitte Australia and built an audit
practice serving private clients in the Western Sydney office. She served on the Deloitte
Australia board of partners for 2 years.
Non-Executive Director of Countplus Limited (CUP.ASX), Chair of their Audit and Risk
Committee and a member of the Acquisitions Committee. Non-Executive Chair of Seeing
Machines Limited (AIM: SEE).
Former directorships (last 3 years):
None
Special responsibilities:
Interim Chair of the Board from 19 September 2018 until 10 October 2018. Chair of the
Audit and Risk Committee and Member of the Nomination and Remuneration Committee
Interests in shares:
Interests in options:
Contractual rights to shares:
None
None
None
Name:
Title:
Qualifications:
Experience and expertise:
Leah Graeve (appointed 12 June 2019)
Independent Non-Executive Director, Chair of the Nomination and Remuneration
Committee
Bachelor of Arts and Law from Monash University and a graduate of the Australian Institute
of Company Directors
Leah is a senior executive at Qantas Airways Limited, where she is Head of Procurement
– IT and Digital and is also a Board Member of Rare Cancers Australia (not-for-profit).
Leah has over 16 years as a successful commercial and contracts negotiator in a range of
organisations and industries. She has held roles as a senior manager at Jetstar Airways,
Legal Counsel at Engonet, IT Commercial Manager at BHP Limited and was a former Policy
Advisor to the Animal Law Institute, a not-for-profit community legal centre.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Chair of the Nomination and Remuneration Committee effective from her appointment on
12 June 2019 and member of the Audit and Risk Committee
Interests in shares:
Interests in options:
Contractual rights to shares:
None
None
None
40
ELMO ANNUAL REPORT 2019Directors’ report Chief Financial Officer
On 4 February 2019 James Haslam was appointed as Chief Financial Officer. James is a Chartered Accountant and fellow of the
Institute of Chartered Accountants in England and Wales (ICAEW). James has over 18 years in accounting and finance including
15 years professional services for KPMG and Deloitte, following which he founded and operated Financial Agility Consulting,
specialising in financial analysis, due diligence, accounting, mergers and acquisitions, and capital markets advice, primarily, in recent
years, based in the technology sector.
Company Secretary
Anna Sandham has held the role of Company Secretary since 1 May 2017. Anna is an experienced company secretary and
governance professional with over 20 years’ experience in various large and small, public and private, listed and unlisted companies.
Anna has previously worked for companies including AMP Financial Services, Westpac Banking Corporation, BT Financial Group
and NRMA Limited. Anna holds a Bachelor of Economics (University of Sydney) and a Graduate Diploma of Applied Corporate
Governance (Governance Institute of Australia) and is a Chartered Secretary and a Fellow of the Governance Institute of Australia.
On 4 February 2019 James Haslam, Chief Financial Officer, was appointed as Joint Company Secretary.
Meetings of directors
The number of directors’ meetings (including meetings of the committees of directors) and number of meetings attended by each
of the Directors of the company during the year ended 30 June 2019 were:
Barry Lewin
Jim McKerlie
Danny Lessem
Trevor Lonstein
Kate Hill
Leah Graeve
Board meetings
Audit and Risk Committee
Nomination and
Remuneration Committee
A
9
2
14
9
14
1
B
9
2
14
8
14
1
A
2
1
3
–
3
–
B
2
1
3
–
3
–
A
2
2
–
2
4
1
B
2
2
–
2
4
1
A – Number of meetings held when director was eligible to attend during the year
B – Number of meetings attended during the time the director held office during the year
Directors’ interests
The relevant interest of each director in the shares and options over such instruments issued by the Group, as notified by the
directors to the ASX in accordance with S205G(1) of the Corporations Act 2001 at the date of this report is as follows:
Directors
Danny Lessem
Barry Lewin
Kate Hill
Leah Graeve
Fully paid
ordinary shares
Share
options
Number
Number
11,989,816
10,000
–
–
–
–
–
–
41
ELMO ANNUAL REPORT 2019 Options granted to the key management personnel of the company, being senior management
or directors
Director or ‘senior management’
Number of options granted
Issuing entity
Danny Lessem
Gordon Starkey
Xin Sun
Darryl Garber
Monica Watt
James Haslam
–
198,612
180,557
130,627
112,163
24,614
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
Shares under option
Issuing entity
Share option plan
Number of shares
under option
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
ELMO Software Limited
SEEP
SEEP
SEEP
SEEP
HPEP
HPEP
HPEP
HPEP
HPEP
HPEP
398,712
31,373
223,247
24,614
202,902
8,735
22,260
8,820
Class of shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
455,354
Ordinary shares
7,885
Ordinary shares
Exercise price
of options
Expiry date of
options
$2.51
$2.51
$5.50
$5.50
$2.51
$2.51
$5.08
$5.08
$5.50
$5.50
17 October 2027
7 December 2027
29 October 2028
27 March 2029
17 October 2027
11 December 2027
9 March 2028
12 June 2028
5 November 2028
25 February 2029
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure
of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company
or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any
related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of
the company for all or part of those proceedings.
42
ELMO ANNUAL REPORT 2019Directors’ report Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 31 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 31 to the financial statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing
the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the
company or jointly sharing economic risks and rewards.
Officers of the company who are former partners of Deloitte Touche Tohmatsu
No officer of the company was an audit partner of Deloitte Touche Tohmatsu, being the auditors during the financial year, at a time
when the audit firm undertook an audit of the company.
Rounding of amounts
The Group is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 56.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity,
in accordance with the requirements of the Corporations Act 2001 and its Regulations.
The remuneration report is set out under the following main headings:
• Remuneration governance
• Key management personnel
• Human resource strategy and remuneration policy
• Remuneration payments and link between performance and reward
• Remuneration of key management personnel
• Share option plan
• Key terms of employment contracts
• Key management personnel equity holdings
43
ELMO ANNUAL REPORT 2019 Remuneration governance
The Nomination and Remuneration Committee is responsible for reviewing the remuneration arrangements for its Directors and
Executives and making recommendations to the Board. The Nomination and Remuneration Committee has two key functions:
• The purpose of the nomination function is to review and make recommendations to the Board with respect to identifying
nominees for directorships and key executive appointments; considering the composition of the Board, ensuring that
effective induction and education procedures exist for new Board appointees, key executives and senior management;
ensuring that appropriate procedures exist to assess and review the performance of the Chairman, Non-executive Directors
and senior executives. The responsibility for the Company’s remuneration policy rests with the full Board notwithstanding the
establishment of the Committee.
• The purpose of the remuneration function is to provide advice, recommendations and assistance to the Board in relation
to the Company’s remuneration policies and remuneration packages of senior executives, Executive Directors and
Non-executive Directors.
Further information regarding the Committee’s responsibilities is set out in the Nomination and Remuneration Committee Charter
available at http://investors.elmosoftware.com.au/Investors/?page=Corporate-Governance.
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the consolidated entity, directly or indirectly, including all directors (non-executive and executive) of the
consolidated entity.
The directors and other key management personnel (KMP) of the consolidated entity during or since the end of the financial
year were:
Position
Non-Executive Directors
Barry Lewin
James (Jim) McKerlie
Catherine (Kate) Hill
Effective date
KMP from appointment on 10 October 2018
KMP until resignation on 19 September 2018
KMP for the entire financial year
Leah Graeve (appointed 12 June 2019)
KMP from appointment on 12 June 2019
Executive Directors
Danny Lessem
Position
KMP for the entire financial year
Trevor Lonstein (resigned 4 February 2019)
KMP until resignation on 4 February 2019
Other Key Management Personnel
Position
James Haslam (appointed 4 February 2019)
Chief Financial Officer and joint Company Secretary
Gordon Starkey
Xin Sun
Darryl Garber
Monica Watt
Chief Operating Officer
Chief Technology Officer
Chief Commercial Officer
Chief Human Resources Officer
44
ELMO ANNUAL REPORT 2019Directors’ report Human resource strategy and remuneration policy
The framework encourages executive reward with the achievement of strategic objectives and the creation of value for
shareholders, and it is considered to be based on market best practice for the delivery of reward. The Board of Directors (the Board)
ensures that executive reward satisfies the following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage/alignment of executive compensation
• transparency
Remuneration payments and link between performance and reward
ELMO’s remuneration strategy is designed to assist ELMO to achieve its corporate objectives through appropriate fixed and
performance-based remuneration as detailed below:
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework for the current year included:
• cash salary
• superannuation
• short-term incentive
•
long-term incentive (share options)
The combination of these comprises the executive’s total remuneration as detailed under ‘Key terms of employment contracts’ below.
Fixed remuneration, consisting of base salary, fees and superannuation is reviewed annually by the Nomination and Remuneration
Committee based on individual and business performance, the overall performance of the consolidated entity and comparable
market remunerations.
Short-term incentive plan (STI Plan)
ELMO has established a short term incentive plan under which employees may be provided with a cash bonus for achievement
against key performance metrics.
Participation in the STI Plan is determined at the discretion of the Board. Key performance metrics will generally relate to conditions
that are within the control of the employee, for example divisional profit targets, strategic measures or other such conditions as
ELMO may decide as relevant to the specific executive role. Subject to the discretion of the Board, the STI Plan has been structured
based on the overall remuneration structure adopted by ELMO such that 60% of an employee’s total package consists of fixed pay
and 40% as performance pay, with the performance pay component divided such that 60% is based on short term performance and
40% of long term performance (excluding the CEO where only the STI element will apply for the performance pay). The quantum of
any reward is determined by the Board.
Amounts to be paid to employees under the STI Plan will typically be paid after the release of full financial year audited results, and
in accordance with the annual review process.
45
ELMO ANNUAL REPORT 2019 Long-term incentive program (LTI Program)
ELMO has established both a Senior Executive Equity Plan (SEEP) and a High Performer Equity Plan (HPEP) as part of its
LTI Program for the year ended 30 June 2019. During the year key management personnel received awards granted in accordance
with the SEEP only.
The Senior Executive Equity Plan (SEEP)
Equity incentives under the SEEP may be granted to employees (or such other person that the Board determines is eligible
to participate) in respect of FY18 and beyond. Offers will be made at the discretion of the Board. The terms of the incentives
granted under this plan will be determined by the Board at grant and may therefore vary over time. ELMO will regularly assess
the appropriateness of its incentive plans and may amend or replace, suspend or cease using the SEEP if considered appropriate
by the Board.
The SEEP is intended to align the interests of the senior executives with Shareholders. Awards under the SEEP have been structured
as an option to receive shares at a future date subject to the recipient paying the exercise price (SEEP Option).
Grants under the SEEP are made annually and are made to the senior executive team and such other executives as the Board may
determine from time to time. Any grants are made subject to the ASX Listing Rules, to the extent applicable.
The following table details the fixed, variable, short and long term incentives in relation to executive remuneration and the link to
the Group’s performance.
Component
Performance measures
Strategic objective/Performance link
Fixed remuneration
The position description of each Executive
includes a set of individual performance
measures which are reviewed and evaluated
each financial year.
Each Executive’s individual performance
measures are specifically designed to ensure
alignment with the Group’s strategic plans for
the year.
Remuneration is set competitively in order to:
Fixed remuneration is based on:
• Recruit: Attract the best talent to ELMO to
• Role and responsibility
ensure sustainable growth
• Retain: Ensure talent is not lured away by
well financed technology organisations or
direct competitors.
• Capability and competencies
• Comparable market remunerations
Performance-based remuneration (STIs and LTIs)
ELMO’s performance pay consists of short and long-term incentives which are designed to:
• Motivate: to achieve financial and non-financial corporate objectives
• Reward: create performance culture that recognises and rewards outstanding performance
• Retain: through the Senior Executive Equity Plan (SEEP) and the subsequent tenure required for options to vest
Short-term incentive plan
(STI) being cash award
The personal Key Performance metrics of each
Executive relate to conditions that are within the
control of the employee which include but are not
limited to divisional revenue and expense targets,
strategic initiatives and such other conditions as
the Group requires.
STIs are cash-based payments
• Quantum of STI = % of performance relative to
an individual’s key performance metrics
Ensures each Executive is held accountable
for the outcomes that are under their control.
These outcomes are designed to support the
overall Group objectives.
STIs motivate individuals, create a high-
performance culture and increase employee
engagement.
46
ELMO ANNUAL REPORT 2019Directors’ report Component (continued)
Performance measures
Strategic objective/Performance link
Ensures a direct link between the performance of
the KMP and their departments with the creation
of shareholder value.
Long-term incentive plan
(LTI) under the (SEEP)
being share options
Participants must be employed on vesting date
for the options to vest.
Performance will be tested at the end of each
vesting period (years 1, 2, and 3) to determine
the extent to which the Company has satisfied
the Total Shareholder Return (TSR) performance
condition.
Vesting against this target will apply if the
following is met:
• 100% of the Options will vest if the company
ranks at or above the 75th percentile;
• Straight line vesting will occur if the Company
ranks between the 50th percentile and the
75th percentile;
• 65% of the Options will vest if the Company
ranks at the 50th percentile;
• 0% of the Options will vest if the Company
ranks below the 50th percentile.
Performance will be tested relative to a peer
group comprising the constituent companies of
the S&P/ASX 300 excluding mining and energy
companies.
The TSR of each company will be measured from
the start of the performance period to the end of
the performance period.
For FY19 performance measures for the STI’s were based on revenue and cost targets for each Executive with individual
performance reviews conducted at the end of the year.
ELMO is committed to continually evolving the key performance indicators for Executives ensuring meaningful shareholder value
aligned targets on which to be assessed.
Non-Executive Directors’ remuneration
Each of the Non-Executive Directors has entered into appointment letters with ELMO, confirming the terms of their appointment
and their roles and responsibilities.
Under the Constitution, the Board decides the total amount paid to each of the Non-executive Directors as remuneration for
their services as a Director. However, under the ASX Listing Rules, the total amount of fees paid to all Directors for their services
(excluding, for these purposes, the salary of any Executive Director) must not exceed in aggregate in any financial year the amount
fixed by the Company in general meeting.
This amount has been fixed by the Company at $750,000 per annum (inclusive of superannuation). Any change to that aggregated
annual sum needs to be approved by the Shareholders. The aggregate sum does not include any special and additional
remuneration for special exertions and additional services performed by a Director as determined appropriate by the Board.
47
ELMO ANNUAL REPORT 2019 Chair and independent Non-Executive Director, Barry Lewin’s annual directors’ fee was $150,000 (inclusive of superannuation),
effective from his appointment to the position on 10 October 2018.
Former Chair and independent Non-Executive Director, Jim McKerlie’s annual director fee was $150,000 (inclusive of
superannuation) per annum plus an amount of $75,000 for additional services provided to the company, prior to his resignation
on 19 September 2018.
Kate Hill receives an annual fee of $100,000 per annum (inclusive of superannuation) for her role as a Non-Executive director,
Chair of the Audit and Risk Committee and a member of the Nomination and Remuneration Committee.
Leah Graeve receives an annual fee of $100,000 per annum (inclusive of superannuation) for her role as a Non-Executive director,
Chair of the Nomination and Remuneration Committee and a member of the Audit and Risk Committee.
Directors may also be reimbursed for expenses properly incurred by the Directors in connection with the affairs of the Company
including travel and other expenses in attending to the Company’s affairs. The Directors’ fees do not include a commission on,
or a percentage of, profits or income.
If a Director renders or is called on to perform extra services or to make any special exertions in connection with the affairs of the
Company, the Board may arrange for special remuneration to be paid to that Director, either in addition to or in substitution for
that Director’s remuneration set out above.
The Non-executive Directors do not receive performance-related compensation, and there are no contractual redundancy or
retirement benefit schemes for Non-executive Directors, other than statutory superannuation contributions.
48
ELMO ANNUAL REPORT 2019Directors’ report Remuneration of key management personnel
The tables below detail remuneration of key management personnel based on the policies previously discussed for the years ended
30 June 2019 and 30 June 2018.
Year ended
30 June 2019
Non-executive
Directors:
James McKerlie
(Chairman)(i)
Barry Lewin (Chairman)(i)
Kate Hill
Leah Graeve(i)
Executive Directors:
Danny Lessem
Trevor Lonstein(i)
Other Key
Management
Personnel:
James Haslam(i)
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
Cash salary
and fees
$
STI(ii)
$
Annual leave
$
Long service
leave
$
Super-
annuation
$
Share
Options(iii)
$
Total
$
190,558
109,231
100,000
5,000
–
–
–
–
–
–
–
–
609,148
202,269
411,667
–
56,056
26,857
130,141
367,808
328,500
217,967
267,637
2,528,259
60,000
158,400
144,000
100,000
120,000
994,067
10,606
38,720
16,999
6,565
20,931
–
–
–
–
–
–
–
20,023
15,137
–
–
–
–
–
–
24,695
15,577
9,705
21,086
25,038
27,266
21,594
–
–
–
–
–
190,558
109,231
100,000
5,000
1,101,566
3,120
247,823
28,266
73,700
67,000
43,210
50,856
238,718
679,737
596,674
395,007
481,017
176,734
35,160
144,961
266,152
4,145,333
Notes in relation to Directors’ and Executive officers’ remuneration table
(i) The following changes to key management personnel occurred during the financial year:
• On 10 October 2018, Barry Lewin was appointed as Non-Executive Director;
• On 19 September 2018 Jim McKerlie resigned as Non-Executive Director;
• On 12 June 2019 Leah Graeve was appointed as Non-Executive Director;
• On 4 February 2019 James Haslam was appointed; and
• On 4 February 2019 Trevor Lonstein resigned as Executive Director.
From and since those dates the individuals ceased and commenced as key management personnel. The remuneration for each has thereby been
disclosed as appropriate until/from these dates.
(ii) The STI bonus is for performance during the retrospective financial year using the performance criteria set out on page 43 after performance
reviews were completed and approved by the Nomination and Remuneration Committee. Short-term incentives were approved by the Board post
year-end but accrued in the financial statements for the year ended 30 June 2019 and were therefore disclosed.
(iii) The value of the share options granted to key management personnel as part of their remuneration under the long-term incentive plan (LTI) is
calculated at the grant date using a Monte Carlo simulation approach subject to the relative total shareholder returns performance conditions,
and is allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair
value of the options recognised as an expense in each reporting period.
49
ELMO ANNUAL REPORT 2019 Year ended
30 June 2018
Non-executive
Directors:
James McKerlie
(Chairman)
David Hancock(i)
Kate Hill(i)
Executive Directors:
Danny Lessem
Trevor Lonstein
Other Key
Management
Personnel:
Gordon Starkey(ii)
Xin Sun(iii)
Monica Watt
Darryl Garber
Cash salary
and fees
$
Sales
commission
$
STI(iv)
$
Bonus
$
Other
benefits(v)
$
Super-
annuation
$
Share
Options(vi)
$
Total
$
225,000
83,710
6,300
475,000
274,960
309,952
274,960
159,817
182,648
–
–
–
–
–
–
–
–
–
120,000
–
–
–
–
–
–
–
–
–
7,953
–
78,557
11,669
25,000
25,000
–
–
–
–
225,000
91,663
6,300
578,557
31,638
463,267
33,878
132,000
15,000
–
–
–
120,000
70,000
80,000
–
–
–
28,525
29,116
8,605
8,429
20,048
25,000
15,183
17,352
34,802
31,638
18,456
21,092
574,205
480,714
272,061
309,521
1,992,347
33,878
522,000
15,000
164,901
135,536
137,626
3,001,288
Notes in relation to Directors’ and Executive officers’ remuneration table
(i) On 8 June 2018, David Hancock resigned as Non-Executive Director and Kate Hill was appointed as Non-Executive Director on the same day.
The remuneration for each has thereby been disclosed as appropriate until/from this date.
(ii) Gordon Starkey, Chief Operating Officer who has an agreed benefits package including a sales commission of 2% received on new business and
an additional $15,000 for a target-related bonus in relation to FY17.
(iii) Xin (Samuel) Sun received $90,444 holiday payout included within other benefits due to an accumulation of accrued annual leave.
(iv) Short-term incentives were approved by the Board post year-end but accrued in the financial statements for the year ended 30 June 2018 and
were therefore disclosed.
(v) Other benefits include annual leave, long service leave and holiday payout.
(vi) The value of the share options granted to key management personnel as part of their remuneration is calculated at the grant date using a
Monte Carlo simulation approach subject to the relative total shareholder returns performance conditions.
50
ELMO ANNUAL REPORT 2019Directors’ report Share option plan
Details on the options over ordinary shares in the Company that were granted as compensation to each key management personnel
during the reporting period are as follows:
Option tranches
Tranche 1
Tranche 2
Tranche 3
Vesting date
31 August 2019
31 August 2020
31 August 2021
Fair value at grant date
Exercise price
$1.18
$1.50
$1.76
$5.50
$5.50
$5.50
The weighted average fair value for the three tranches is $1.56.
Grant and expiry for all three tranches of options are as follows in relation to key management personnel:
Key management personnel
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
James Haslam
Grant date
29 October 2018
29 October 2018
29 October 2018
29 October 2018
27 March 2019
Expiry date
29 October 2028
29 October 2028
29 October 2028
29 October 2028
27 March 2029
51
ELMO ANNUAL REPORT 2019 Balance as at
1 July 2018
Number
Granted as compensation
Cancelled
Number
Tranche 1
Tranche 2
Tranche 3
Balance as at
30 June 2019
Vested
Number
Number
Executive Directors:
Trevor Lonstein(i)
119,019
12,308
18,462
30,768
(149,184)
31,373
31,373
Other Key
Management
Personnel:
James Haslam
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
–
130,920
119,019
69,428
79,345
4,923
13,538
12,308
8,547
10,256
7,384
20,308
18,462
12,821
15,385
12,307
33,846
30,768
21,367
25,641
–
–
–
–
–
24,614
198,612
180,557
112,163
130,627
–
34,510
31,373
18,301
20,915
(i) Trevor Lonstein ceased employment on 4 February 2019 and as a result all unvested options were cancelled.
Balance as at
1 July 2017
Number
Granted as compensation
Number
Tranche 1
Tranche 2
Tranche 3
Balance as at
30 June 2018
Number
Nil
Nil
Nil
Nil
Nil
31,373
36,364
51,282
119,019
34,510
31,373
18,301
20,915
40,000
36,364
21,212
24,242
56,410
51,282
29,915
34,188
130,920
119,019
69,428
79,345
Executive Directors:
Trevor Lonstein
Other Key Management Personnel:
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
52
ELMO ANNUAL REPORT 2019Directors’ report There were nil ordinary shares of ELMO Software Limited issued during the year ended 30 June 2019 to key management personnel
and up to the date of this report resulting from the exercise of options.
Key terms of employment contracts for the year ended 30 June 2019
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Danny Lessem
Executive Director and Chief Executive Officer
Base salary for the year ending 30 June 2019 of $650,000 including superannuation, to be reviewed annually by
the Nomination and Remuneration Committee with a 6 month termination notice by either party.
Trevor Lonstein
Executive Director and Chief Financial Officer (resigned as director on 4 February 2019)
Base salary for the year ending 30 June 2019 of $360,000 including superannuation, pro-rated to
4 February 2019. Trevor was eligible to participate in the short and long term incentive programs for the year
ending 30 June 2019, effective until his resignation on 4 February 2019.
James Haslam (appointed 4 February 2019)
Chief Financial Officer
Base salary for the year ending 30 June 2019 of $360,000 including superannuation, pro-rated from
4 February 2019, to be reviewed annually by the Nomination and Remuneration Committee with a 6 month
termination notice by either party. James was eligible for short term and long term incentive benefit effective
from his appointment on 4 February 2019.
Gordon Starkey
Chief Operating Officer
Base salary for the year ending 30 June 2019 of $396,000 including superannuation, to be reviewed annually by
the Nomination and Remuneration Committee with a 6 month termination notice by either party. Gordon was
eligible for short term and long term incentive benefit.
Xin Sun
Chief Technology Officer
Base salary for the year ending 30 June 2019 of $360,000 including superannuation, to be reviewed annually
by the Nomination and Remuneration Committee with a 6 month termination notice by either party. Xin was
eligible for short term and long term incentive benefit.
Monica Watt
General Manager: Human Resources
Base salary for the year ending 30 June 2019 of $250,000 including superannuation, to be reviewed annually by
the Nomination and Remuneration Committee with a 6 month termination notice by either party. Monica was
eligible for short term and long term incentive benefit.
Darryl Garber
Chief Commercial Officer
Base salary for the year ending 30 June 2019 of $300,000 including superannuation, to be reviewed annually by
the Nomination and Remuneration Committee with a 6 month termination notice by either party. Darryl was
eligible for short term and long term incentive benefit.
53
ELMO ANNUAL REPORT 2019 Key management personnel equity holdings
Year ended 30 June 2019
Non-Executive Directors
Barry Lewin(i)
Jim McKerlie(ii)
Kate Hill
Leah Graeve
Executive Directors
Danny Lessem
Trevor Lonstein(iii)
Other Key Management Personnel
James Haslam(iv)
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
Balance as at
1 July 2018
Purchased/other
changes during
the year
Balance as at
30 June 2019
Number
Number
Number
–
50,000
–
–
11,989,816
420,695
–
510,945
425,695
1,250
460,945
10,000
(50,000)
–
–
–
–
5,000
(90,250)
–
–
(40,250)
10,000
–
–
–
11,989,816
420,695
5,000
420,695
425,695
1,250
420,695
(i) Barry Lewin was appointed as a Non-Executive Director on 10 October 2018.
(ii Jim McKerlie resigned as Non-Executive Director on 19 September 2018. At the date of resignation Jim McKerlie held 50,000 shares.
(iii) Trevor Lonstein resigned as a director on 4 February 2019.
(iv) James Haslam was appointed on 4 February 2019.
Balance as at
1 July 2017
Purchased/other
changes during
the year
Balance as at
30 June 2018
Number
Number
Number
50,000
–
–
11,989,816
420,695
510,945
425,695
1,250
460,945
–
–
–
–
–
–
–
–
–
50,000
–
–
11,989,816
420,695
510,945
425,695
1,250
460,945
Year ended 30 June 2018
Non-Executive Directors
Jim McKerlie
David Hancock(i)
Kate Hill(ii)
Executive Directors
Danny Lessem
Trevor Lonstein
Other Key Management Personnel
Gordon Starkey
Xin Sun
Monica Watt
Darryl Garber
(i) David Hancock resigned as a Director on 8 June 2018.
(ii) Kate Hill was appointed as a Director on 8 June 2018.
This concludes the remuneration report (audited).
54
ELMO ANNUAL REPORT 2019Directors’ report Directors’ declaration
30 June 2019
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Barry Lewin
Chairman
15 August 2019
Sydney
Danny Lessem
Director
55
ELMO ANNUAL REPORT 2019
Auditor’s independence declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Australia
Tel: +61 (0) 2 9322 7000
www.deloitte.com.au
15 August 2019
The Board of Directors
Elmo Software Limited
Level 27, 580 George Street
SYDNEY, NSW 2000
Dear Board Members
Elmo Software Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Elmo Software Limited.
As lead audit partner for the audit of the financial statements of Elmo Software Limited for the financial year
ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions
of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
56
ELMO ANNUAL REPORT 2019 Contents
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
58
59
60
61
62 Notes to the financial statements
95 Directors’ declaration
96
Independent auditor’s report to the members of ELMO Software Limited
General information
The financial statements cover ELMO Software Limited as a consolidated entity consisting
of ELMO Software Limited and the entities it controlled at the end of, or during, the year.
The financial statements are presented in Australian dollars, which is ELMO Software Limited’s
functional and presentation currency.
ELMO Software Limited is a listed public company limited by shares, incorporated and domiciled
in Australia. Its registered office and principal place of business are:
Registered office
Level 12
680 George Street
Sydney NSW 2000
Principal place of business
Level 27
580 George Street
Sydney NSW 2000
A description of the nature of the consolidated entity’s operations and its principal activities are
included in the directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors,
on 15 August 2019. The directors have the power to amend and reissue the financial statements.
57
ELMO ANNUAL REPORT 2019 Consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2019
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Depreciation and amortisation expense
Impairment loss on trade receivables
Net gain on derecognition of financial assets measured at cost
Finance income
Finance costs
Loss before income tax expense from continuing operations
Income tax expense
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year attributable to the owners of
ELMO Software Limited
Earnings per share
From continuing operations
Basic earnings
Diluted earnings
Note
4
5
16
7
8
9
Consolidated
2019
$’000
40,053
(5,388)
2018
$’000
26,520
(2,245)
34,665
24,275
35
(17,786)
(3,247)
127
(8,699)
(806)
(15,332)
(13,098)
(9,437)
(894)
98
857
(764)
(4,250)
(787)
–
265
–
(11,805)
(2,973)
(1,375)
(15)
(13,180)
(2,988)
–
–
(13,180)
(2,988)
Cents
Cents
37
37
(20.85)
(20.85)
(5.29)
(5.29)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
58
ELMO ANNUAL REPORT 2019
Consolidated statement of financial position
as at 30 June 2019
Consolidated
2019
$’000
2018
$’000
Note
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax refundable
Other current assets
Lease incentive receivable
Finance lease receivable
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets and capitalised costs
Right-of-use assets
Finance lease receivable
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Deferred and contingent consideration
Lease liabilities
Employee benefits
Current tax liabilities
Contract liabilities
Lease payables and incentives
Total current liabilities
Non-current liabilities
Deferred and contingent consideration
Lease liabilities
Employee benefits
Deferred tax
Contract liabilities
Lease payables and incentives
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
10
11
12
13
17
14
15
16
17
20
21
18
22
12
23
21
18
25
24
23
27
27
28
Equity attributable to the owners of ELMO Software Limited
Total equity
The above statement of financial position should be read in conjunction with the accompanying notes.
27,698
9,540
–
533
–
186
45,995
6,460
7
1,099
4,164
–
37,957
57,725
4,249
58,860
8,173
289
71,571
109,528
7,286
3,953
2,632
1,939
71
19,910
–
35,791
5,500
9,309
172
2,977
382
–
18,340
54,131
55,397
72,733
836
(18,172)
55,397
55,397
5,789
35,815
–
–
41,604
99,329
4,636
5,735
–
1,010
–
13,782
925
26,088
400
–
128
801
–
3,700
5,029
31,117
68,212
72,340
158
(4,286)
68,212
68,212
59
ELMO ANNUAL REPORT 2019 Consolidated statement of changes in equity
for the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of shares to the public via Institutional Placement
and Share Purchase Plan (net of issue costs and tax)
Issue of shares under business combinations
Reserves:
Translation movement during the year
Equity settled share-based payment
Foreign
currency
translation
reserves
$’000
(47)
–
–
–
–
–
–
–
Issued
capital
$’000
25,110
–
–
–
45,080
2,150
–
–
Balance at 30 June 2018
72,340
(47)
Share option
reserves
$’000
Accumulated
losses
$’000
Total
equity
$’000
–
–
–
–
–
–
–
205
205
(1,298)
23,765
(2,988)
(2,988)
–
–
(2,988)
(2,988)
–
–
–
–
45,080
2,150
–
205
(4,286)
68,212
Consolidated
Balance at 1 July 2018
AASB 15 adjustment (net of tax): note 2
AASB 16 adjustment (net of tax): note 2
Issued
capital
$’000
72,340
–
–
Restated total at the beginning of the financial year
72,340
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of shares under business combinations – deferred
consideration from prior year acquisitions (net of costs)
Reserves:
Translation movement during the year
Equity settled share-based payment
–
–
–
393
–
–
Balance at 30 June 2019
72,733
Foreign
currency
translation
reserves
$’000
Share option
reserves
$’000
Accumulated
losses
$’000
Total
equity
$’000
(47)
–
–
(47)
–
–
–
–
52
–
5
205
(4,286)
68,212
–
–
(736)
30
(736)
30
205
(4,992)
67,506
–
–
–
–
–
626
831
(13,180)
(13,180)
–
–
(13,180)
(13,180)
–
–
–
393
52
626
(18,172)
55,397
The above statement of changes in equity should be read in conjunction with the accompanying notes.
60
ELMO ANNUAL REPORT 2019 Consolidated statement of cash flows
for the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Income taxes (paid)/refunded
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for transaction costs of acquisitions
Payment for acquisitions of businesses and subsidiaries, net of cash acquired
Receipt for lease incentives
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs (net of tax)
Repayment of lease liabilities
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Consolidated
2019
$’000
2018
$’000
Note
36
45,060
28,623
(40,226)
(24,655)
4,834
833
(196)
5,471
(1,001)
(9,433)
(494)
3,968
265
150
4,383
(5,628)
(4,845)
–
(13,222)
(17,564)
2,874
–
(21,276)
(28,037)
–
(51)
(2,441)
46,023
(2,975)
–
(2,492)
43,048
(18,297)
45,995
Cash and cash equivalents at the end of the financial year
10
27,698
The above statement of cash flows should be read in conjunction with the accompanying notes.
19,394
26,601
45,995
61
ELMO ANNUAL REPORT 2019
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
This is the first set of the Group’s annual financial statements in which AASB 15 Revenue, AASB 9 Financial Instruments, have
been applied and the Group has chosen to early adopt AASB 16 Leases. Application of new Australian accounting standards are
described in note 2.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for
for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are
disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 33.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ELMO Software Limited (‘company’
or ‘parent entity’) as at 30 June 2019 and the results of all subsidiaries for the year then ended. ELMO Software Limited and its
subsidiaries together are referred to in these financial statements as the ‘consolidated entity’.
Subsidiaries
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when
the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.
Transactions eliminated upon consolidation
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or
other assets are acquired when the control is transferred to the group.
62
ELMO ANNUAL REPORT 2019
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree.
For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate
share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss, except if related to the
issue of equity securities.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s
operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised
in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is
recognised as goodwill. Any goodwill that arises is tested annually for impairment. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the
difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of
the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration
transferred and the acquirer’s previously held equity interest in the acquirer.
Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as
the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of
resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is ELMO Software Limited’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or
loss. Foreign currency differences are generally recognised in profit or loss and presented within finance costs.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which
approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency reserve in equity.
Revenue recognition
Revenue from contracts with customers
From 1 July 2018 the Group has applied AASB 15, Revenue from contracts with customers. Information regarding the Group’s
accounting policies in relation to contracts with customers and the effect of initially applying AASB 15 is provided in note 2(ii).
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
63
ELMO ANNUAL REPORT 2019 Note 1. Significant accounting policies (continued)
Other income
Government grants
Government grants, including non-monetary grants at fair value, are only recognised when there is reasonable assurance that:
a. all conditions attaching to the Government grant will be complied with;
b. the value of the grant can be determined with reasonable certainty;
c. the grant will be received.
Government grants are recognised as revenue during the period, or periods in which the expenses for which the grants are
intended to compensate are recognised.
If the Government grant cannot be determined with reasonable certainty, then the grant is recognised as revenue when it is received.
Finance income and finance costs
The Group’s finance income and finance costs include:
•
Interest income;
•
Interest expense;
• Foreign currency gain or loss on financial assets or financial liabilities;
• Gain on the remeasurement to fair value of any pre-existing interest in an acquired entity as part of a business combination; and
• Fair value loss on contingent consideration classified as a financial liability through a business combination.
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of
the financial asset. Interest revenue includes interest for the lease receivable in relation to the sub-lease held.
Interest expense includes interest in relation to lease liabilities and is calculated based on the default interest rate implicit in the
lease contract.
Cost of sales
Cost of sales includes wages, salaries and other expenses of employees who carry out implementation, training and support of
software for customers. Cost of sales also includes third party hosting costs.
Income tax
Income tax comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business
combination or items recognised directly in equity or other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to
tax payable or receivable for the previous years. The amount of current tax payable or receivable is the best estimate of the tax
expected to be paid or received. It is measured using tax rates enacted or substantively enacted at the reporting date.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets
are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
64
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Deferred tax assets are recognised for deductible temporary differences, unused tax credits and unused tax losses to the extent it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying
amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are
future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current
tax liabilities and deferred tax assets against deferred tax liabilities and they relate to the same taxable authority on either the same
taxable entity or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated
entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after
the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash at bank and term deposits over 90 days.
Trade and other receivables
Trade receivables are initially recognised at cost being their carrying value which is a reasonable approximation of their fair value.
Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by
reducing the carrying amount directly.
Upon the initial application of AASB 9 Financial Instruments, (note 2(i)), the Group recognises a loss allowance at an amount equal
to lifetime expected credit losses (ECL) (see note 26 for further discussion).
Other receivables are recognised at amortised cost, less any provision for impairment.
Property, plant and equipment
(i) Recognition and measurement
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate
items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it probable that the future economic benefits associated with the expenditure will flow
to the Group.
65
ELMO ANNUAL REPORT 2019 Note 1. Significant accounting policies (continued)
(iii) Depreciation
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding
land) over their expected useful lives and is recognised in profit or loss.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the
estimated useful life of the assets, whichever is shorter.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
Leasehold improvements
3-8 years
Plant and equipment
Computer equipment
3-7 years
2-4 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Intangible assets
(i) Recognition and measurement
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the
date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not
amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at
cost less amortisation and any impairment.
The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference
between net disposal proceeds and the carrying amount of the intangible asset.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Software development costs – Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the
project will be a success considering its commercial and technical feasibility; the consolidated entity is able to use or sell the asset;
the consolidated entity has sufficient resources; and intent to complete the development and its costs can be measured reliably.
Capitalised sales commission costs
Commission costs are those amounts paid to business development employees as remuneration for securing new contracts based
on a discretionary fixed percentage of revenue.
Customer lists
Upon acquisition of a new business, customer lists which are acquired including active revenue contracts are amortised over
management’s best estimate of their useful life.
Trademark
The trademark is treated as having an indefinite useful life because it is expected to contribute to net cash flows indefinitely and
thus the trademark is not amortised until its useful life is determined to be finite. It will be tested for impairment annually and
whenever there is an indication that it may be impaired.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits of the specific asset to which it
relates. All other expenditure including any expenditure for internally generated goodwill or brands is recognised in the profit
or loss as incurred.
66
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 (iii) Amortisation
Amortisation is calculated to write off the cost of the intangible assets less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill and trademarks are not amortised.
The estimated useful lives for current and comparative periods are as follows:
Software development costs
3 years
Capitalised sales commission costs
1-3 years
Customer lists
7-10 years
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently, if events or changes in circumstances indicate that they might be impaired. Other assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash of other assets or cash generating units (CGUs). Goodwill arising from a business
combination is allocated to CGUs or a group of CGUs that are expected to benefits from the synergies of the consolidation.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount of the asset of CGU is the higher of the assets fair value less costs to sell and value in use.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated
to the CGU, and then to reduce the carrying amount of other assets in the CGU or on a pro-rata basis.
An impairment in respect of goodwill is not reversed. For other assets, an impairment loss is only reversed to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year
and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are
unsecured and are usually paid within 30 days of recognition.
Employee benefits
Short-term employee benefits
Short-term benefits are expensed as the relative service is provided. A liability is recognised for the amount expected to be paid
if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be estimated reliably.
Share-based payment arrangements
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an
expense, with a corresponding increase in equity, to the share option reserve, over the vesting period of the awards. The fair value
of the share options has been determined as detailed in note 38.
Other long-term employee benefits
The Group’s obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return
for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates
including related on-costs and expected settlement dates, and is discounted using the rates attached to the high quality corporate
bonds at the statement of financial position date, the maturity of which approximates to the terms of the Group’s obligations.
67
ELMO ANNUAL REPORT 2019 Note 1. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the
absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are
used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels
are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable,
with external sources of data.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of Elmo Software Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
In the case that the Group is in a loss position for the period no effect will be applied in relation to dilutive factors.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Standards issued but not yet effective
A number of new standards are effective for annual periods beginning on or after 1 July 2018. The Group has decided to early
adopt AASB 16, Leases. The accounting policy and impact on transition is provided in note 2(iii).
From the remaining standards and interpretations issued but not yet effective, the Group has assessed that there will be no
significant impact on the financial statements.
68
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Note 2. Application of new Australian accounting standards
(i) AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or
sell non-financial assets. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. As a result of the
adoption of AASB 9, where relevant the Group has adopted amendments to AASB 101 Presentation of Financial Statements,
which require impairment of financial assets to be presented in a separate line item in the statement of the profit or loss or other
comprehensive income.
Impairment: New impairment requirements will use an ‘expected credit loss’ (‘ECL’) model to recognise an allowance. Impairment
will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial
recognition in which case the lifetime ECL method is adopted. Impairment of trade receivables which would previously have been
included in other expenses is now stated as ‘impairment loss on trade receivables’. Any impairment losses on other financial assets
are presented under ‘finance costs’ and not presented separately in the statement of profit or loss and other comprehensive income.
The Group has assessed the effect of this requirement upon the trade receivables being the only relevant asset grouping. It has
been the policy of the Group to continually assess the collectability of all trade receivables including the assessment of credit risk at
the outset of a sale and relevant past experience. There were no significant amendments required upon the adoption of AASB 9 for
the Group or amendments to be disclosed.
(ii) AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts with Customers, from 1 July 2018. The Group has applied AASB 15 using
the modified approach, with any cumulative effect being recognised in opening retained earnings.
AASB 15 establishes a framework for determining whether, how much and when revenue is recognised. It replaced AASB 118
Revenue and related interpretations. Under AASB 15, revenue is recognised when a customer obtains control of the goods or
services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement. AASB introduces
a 5-step approach to revenue recognition. Under AASB 15, an entity recognises revenue when (or as) a performance obligation is
satisfied, i.e. when ‘control’ of the goods or services underlying a particular performance obligation is transferred to the customer.
Accounting treatment under AASB 15
The group has two primary revenue streams:
• Software solution services; and
• Professional services
(i) Identification of distinct elements and separate performance obligations
Software solution services
In the case where the customer contract includes a license and additional integration services provided including implementation
and training (“software solution services”) the assessment has been performed as to whether a separate performance obligation
exists for each element. These additional services provided with the licence are not distinct or separately identifiable and therefore
the contract includes only one performance obligation under AASB 15.
Under the Group’s previous revenue recognition policy, revenue from the sale of software licences when sold in conjunction with
integration services (which includes but is not limited to installation, implementation and initial training) were generally treated as
separate performance obligations with the associated revenue recognised on satisfaction of each separate performance obligation.
Professional services
These services can be provided at any point during the life of the licence contract and are therefore classified as a separate
performance obligation. No impact of the transition to AASB 15 Revenue has been identified to the accounting policy for
standalone professional services.
69
ELMO ANNUAL REPORT 2019 Note 2. Application of new Australian accounting standards (continued)
(ii) Revenue recognition under AASB 15
The Group now recognises revenue from the following major sources under AASB 15 as below:
Revenue Stream
Performance Obligation
Timing of Recognition
“Software solution services”
– software licences, implementation
and integration services
Professional services
Access to software
Over the life of the contract as the customer
simultaneously receives and consumes the benefits
of accessing the software
As defined in the contract but
typically at completion of the service
Recognised over time, but because time delivered is
minimal, point in time recognition has been applied.
(iii) Impact of transition to AASB 15
An assessment has been performed and determined that during the three annual financial years to 30 June 2018, revenue of
$1,052,000 was recognised (under AASB 118) for the additional services provided to customers as part of a software solution
services contract. Under AASB 15, these services are not considered to be a separately identifiable performance obligation.
Accordingly, this revenue cannot be recognised separately but instead should be recognised over the period for which services
are being delivered. Consistent with the transition arrangements no adjustment has been made to the year ended 30 June 2018
comparative revenue balance but an adjustment has been made to the opening balances to the balance sheet to reduce retained
earnings by $736,400 (net of tax), with a corresponding increase to contract liabilities (deferred income). The amounts that have
been deferred will be recognised over the remaining life of the contracts, typically over the next two to three years.
There are no other significant adjustments required in relation to the adoption of AASB 15 for the current financial year.
(iii) AASB 16 Leases
General impact of application of AASB 16 Leases
In the current year, the Group, for the first time, has applied AASB 16 Leases in advance of its effective date with the date of initial
application of AASB 16 for the Group being 1 July 2018.
AASB 16 introduces new requirements with respect to lease accounting by removing the distinction between operating and finance
leases, requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases except for short-term
leases, being those less than 12 months, and leases of low-value assets.
The Group has applied AASB 16 using the modified retrospective approach, with no restatement to the comparative information.
Impact of the definition of a new lease
The change in definition of a lease mainly relates to the concept of control. AASB 16 determines whether a contract contains a
lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange
for consideration. The Group has applied this definition to all lease contracts currently held.
Impact on lessee accounting
Previously, under AASB 117 for the comparative period, all leases were classified as operating leases and were not recognised in
the Group’s statement of financial position. Payments under operating leases were recognised in the profit or loss on a straight-line
basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the
term of the lease.
AASB 16 changes how the Group accounts for leases previously classified as operating leases under AASB 117 including:
• Recognising right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at
the present value of future lease payments;
• Recognising depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;
and
70
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 • Separating the total amount of cash paid separated into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the Consolidated Cash flow statement.
Lease incentives under AASB 16 are recognised as part of the measurement of the right-of-use assets and lease liabilities.
Under AASB 16, right-of-use assets are tested for impairment in accordance with AASB 136 Impairment of assets. This replaces
the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the Group has opted to recognise a lease
expense on a straight-line basis as permitted by AASB 16. This expense is presented within other expenses in the consolidated
statement of profit or loss.
Impact on lessor accounting
Under AASB 16 the Group is required to assess the classification of the sub-lease commenced during the financial year
with reference to the right-of-use asset, not the underlying asset. The Group concluded that the sub-lease is a finance lease
under AASB 16. Upon commencement of the sub-lease the right-of-use asset held by the Group as the intermediate lessor
is derecognised, recognising a lease receivable being the present value of sub-lease payments to be received with any gain
or loss being recognised in the profit or loss.
Financial impact of initial application of AASB 16
On transition to AASB 16, at 1 July 2018, the Group recognised an additional $10.3m of right-of-use assets and $10.3m of lease
liabilities.
When measuring lease liabilities, the Group discounted lease payments using the interest rate implicit in the lease contract, being 6%.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities (refer to the respective notes) within the next financial year are discussed below.
Revenue recognition
Judgement is required as to whether revenue is recognised over time or at a point in time.
Business combinations
As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired,
liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available
information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective,
where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and
amortisation reported.
There is significant judgement involved including determining the fair value of consideration and critically valuing the intangible
assets for each business combination. Several factors are taken into consideration in valuing intangibles including replacement cost
for software and revenue growth assumptions and discount rates underlying the valuation of customer lists and software.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets
at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to
impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs
of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
71
ELMO ANNUAL REPORT 2019 Note 3. Critical accounting judgements, estimates and assumptions (continued)
Impairment of goodwill
The consolidated entity assesses impairment of goodwill and other indefinite life intangible assets annually by performing a fair
value less costs of disposal calculation, which incorporate a number of key estimates and assumptions. In determining the Elmo
CGU’s fair value significant judgement is used in considering the appropriate comparable companies, and consequently the
appropriate revenue multiple to determine Elmo’s fair value.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property,
plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Leases
For the purpose of measuring the right-of-use asset lease term, duration is estimated. This requires judgement and is based on an
assessment as to whether an option to extend or terminate a lease will be exercised. The Group must also consider each contract
held to assess whether a contract includes a lease under AASB 16.
Recovery of deferred tax assets
Deferred tax assets for tax losses and R&D tax credits are only recognised if the Group considers it is probable that future taxable
amounts will be available to utilise those tax losses and R&D tax credits against.
Note 4. Revenue from contracts with customers
The effect of initially applying AASB 15 Revenue from contracts with customers, is described in note 2(ii). Due to the transition
method adopted, comparative information has not been restated to reflect the new requirements.
Identification of reportable operating segments
The Group operates in one segment, based on the internal reports that are reviewed and used by the Board of Directors
(who are identified as the Chief Operating Decision Makers (CODM)) in assessing performance and in determining the allocation
of resources.
As a result, the operating segment information is disclosed in the statements and notes to the financial statements.
Geographical information
Australia
New Zealand
Singapore
Revenue from
external customers
Geographical
non-current assets
2019
$’000
37,124
2,929
–
2018
$’000
25,423
892
205
2019
$’000
58,313
13,258
–
2018
$’000
35,593
6,011
–
40,053
26,520
71,571
41,604
The majority of the Group’s revenue is generated from sales contracts with Australia, Singapore and New Zealand companies.
The geographic split of this revenue across all companies is: a) Australia (87.70%, 2018: 89.70%); b) New Zealand (10.20%, 2018:
8.40%); c) Singapore (0.60%, 2018: 0.90%) and d) Other (1.50%, 2018: 1.0%)
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post-
employment benefits assets and rights under insurance contracts.
72
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Timing of revenue recognition
Products and services transferred at a point in time
Products and services transferred over time
Total revenue
Note 5. Other income
Government grants
Other income
Note 6. Expenses
Employment expenses
Sales and marketing
Research and development
General and administrative
Included in general and administrative expenses
Consultancy and subcontractor expenses
Rental expenses
Note 7. Finance income
Interest on lease receivable
Other interest income
Consolidated
2019
$’000
1,839
38,214
40,053
2018
$’000
93
34
127
Consolidated
2019
$’000
–
35
35
Consolidated
2019
$’000
2018
$’000
13,076
3,132
7,187
5,369
792
6,560
23,395
12,721
1,189
1,056
1,651
1,514
Consolidated
2019
$’000
2018
$’000
24
833
857
–
265
265
73
ELMO ANNUAL REPORT 2019 Note 8. Finance costs
Interest on lease liability
Foreign exchange loss
Note 9. Income tax expense
Income tax expense
Current tax expense
Deferred tax – origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Income tax expense is attributable to:
Loss from continuing operations
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets (note 24)
Deferred tax – origination and reversal of temporary differences
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax expense from continuing operations
Loss before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible in calculating taxable income:
Effect of expenses that are not deductible in determining taxable profit
Effect of tax concession (Research and Development Tax Incentives)
Non-deductible R&D costs (R&D tax offset not booked)
Tax losses not recognised
Benefit of tax losses not previously recognised
Other
Adjustment to opening deferred tax asset
Adjustment recognised for prior periods
Income tax expense
Amounts credited directly to equity
Deferred tax liabilities (note 24)
74
Consolidated
2019
$’000
751
13
764
2018
$’000
–
–
–
Consolidated
2019
$’000
2018
$’000
(358)
(1,017)
–
(1,375)
(1,375)
(1,375)
(1,017)
(1,017)
(11,805)
(11,805)
3,541
(209)
–
(3,623)
(451)
9
56
(677)
(698)
–
(1,375)
6
107
(128)
(15)
(15)
(15)
107
107
(2,988)
(2,988)
896
(381)
(628)
–
–
–
–
(113)
–
98
(15)
–
1,040
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Note 10. Cash and cash equivalents
Cash at bank
Term deposits
Cash and cash equivalents
Note 11. Trade and other receivables
Trade receivables
Loss allowance
Other receivables
Consolidated
2019
$’000
25,640
2,058
27,698
Consolidated
2019
$’000
11,015
(1,475)
9,540
–
9,540
2018
$’000
45,861
134
45,995
2018
$’000
7,326
(902)
6,424
36
6,460
The consolidated entity has recognised a loss of $894,268 (2018: $786,971) in profit or loss in respect of impairment of receivables
for the year ended 30 June 2019.
Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables is included in note 26.
Note 12. Current tax
(i) Current tax asset: income tax refundable
Income tax refundable
The income tax refundable for the prior year comprises of tax refunds owing to the subsidiaries in the Group.
(ii) Current tax liabilities: income tax payable
Income tax payable
Consolidated
2019
$’000
–
2018
$’000
7
Consolidated
2019
$’000
71
2018
$’000
–
For the year ended 30 June 2019 as the Group revenue exceeded the $20m threshold relating to research and development tax
credits, there will be a non-refundable tax offset carried forward of $3,622,740 available to the parent entity (2018: $841,312).
The Group has decided not to book the non-refundable Research and Development tax offset carried forward as a deferred tax
asset in this financial year until there is a reasonable certainty that sufficient future taxable income will be available (see note 24).
75
ELMO ANNUAL REPORT 2019
Note 13. Other current assets
Prepayments
Other debtors
Note 14. Property, plant and equipment
Plant and equipment – at cost
Accumulated depreciation
Computer equipment – at cost
Accumulated depreciation
Leasehold improvements – at cost
Accumulated depreciation
Consolidated
2019
$’000
473
60
533
Consolidated
2019
$’000
608
(342)
266
1,288
(830)
458
4,311
(786)
3,525
4,249
2018
$’000
1,096
3
1,099
2018
$’000
518
(296)
222
855
(541)
314
5,253
–
5,253
5,789
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Additions
Additions through business combinations
Disposals
Depreciation expense
Balance at 30 June 2018
Additions
Additions through business combinations
Disposals
Transfers
Depreciation expense
Effects of movements in exchange rates
Balance at 30 June 2019
76
Plant and
equipment
$’000
Computer
equipment
$’000
Leasehold
improvements
$’000
153
97
25
(1)
(52)
222
165
–
–
(48)
(73)
–
266
170
197
52
–
(105)
314
421
1
(76)
48
(254)
4
458
Total
$’000
506
5,551
77
(158)
(187)
5,789
1,001
1
183
5,257
–
(157)
(30)
5,253
415
–
(1,355)
(1,431)
–
(786)
(2)
3,525
–
(1,113)
2
4,249
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Note 15. Intangibles assets and capitalised costs
Consolidated
Software development costs
Accumulated amortisation
Capitalised sales commission costs
Accumulated amortisation
Customer lists (acquired through business combinations)
Accumulated amortisation
Goodwill (acquired through business combinations)
Trademarks (acquired through business combinations)
2019
$’000
24,712
(11,099)
13,613
3,490
(2,089)
1,401
8,816
(1,600)
7,216
36,051
579
58,860
2018
$’000
13,606
(6,633)
6,973
2,338
(1,588)
750
6,995
(525)
6,470
21,380
242
35,815
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Additions
Additions through business
combinations (note 21)
Amortisation expense
Balance at 30 June 2018
Software
development
costs
$’000
Capitalised
Commission
costs
$’000
2,772
4,200
3,113
(3,112)
6,973
762
645
–
(657)
750
Additions
8,283
1,148
Additions through business
combinations (note 21)
Amortisation expense
Effects of movements in exchange rates
Balance at 30 June 2019
2,759
(4,466)
64
13,613
–
(501)
4
1,401
Customer list
$’000
Goodwill
$’000
Trademarks
$’000
366
–
6,585
(481)
6,470
–
1,821
(1,075)
–
7,216
2,071
–
19,309
–
21,380
2
14,669
–
–
–
–
242
–
242
–
337
–
–
Total
$’000
5,971
4,845
29,249
(4,250)
35,815
9,433
19,586
(6,042)
68
36,051
579
58,860
Goodwill arose during the current financial year through the acquisition of HROnboard and BoxSuite (2018: Quinntessential
Marketing Consulting, Sky Payroll and Pivot Software); refer to Note 21 for further details.
An impairment loss, if any, is recognised for the amount by which the carrying amount exceeds its recoverable amount of the cash
generating unit (classified as a single CGU by the Group under the current business model). The recoverable amount is determined
on a Fair Value Less Cost of Disposal Basis and as at 30 June 2019 following impairment testing there are no indicators to suggest
that an impairment would occur.
77
ELMO ANNUAL REPORT 2019 Note 16. Right of use assets
The Group holds leases for several properties with lease terms ranging from 3 to 5 years. AASB 16 Leases has been adopted
with a modified retrospective transition approach so there are no right of use assets recognised for the comparative year ended
30 June 2018.
Right-of-use assets: property
As at 1 July 2018: cost recognised upon transition to AASB 16
Less: accumulated depreciation recognised upon transition to AASB 16
Net carrying amount as at 1 July 2018
Additions
Derecognition of right-of-use asset(i)
Depreciation
Net carrying amount as at 30 June 2019
Amounts recognised in profit or loss in relation to leases
Interest expense
Expense relating to low value assets
Expense relating to variable lease payments not included in the measurement of the lease liability
Cash flow from leases
Total cash outflow as a lessee
Income from sub-leasing of right-of-use asset
Consolidated
2019
$’000
11,492
(1,156)
10,336
627
(505)
(2,285)
8,173
751
19
449
3,917
152
(i) During the financial year, a sub-lease was entered into derecognising the right-of-use asset in relation to the head lease and recognising a financial
lease receivable (note 17) with a resulting gain to the profit or loss of $98,332.
Note 17. Finance lease receivable
The Group holds a sub-lease which commenced during the current financial year in relation to a property recognised as a finance
lease under AASB 16 Leases.
Current finance lease receivable (recoverable within 12 months)
Non-current finance lease receivable (recoverable after 12 months)
Consolidated
2019
$’000
186
289
78
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Note 18. Lease liabilities
AASB 16 Leases has been adopted with a modified retrospective transition approach so there are no right of use liability disclosures
for the comparative year ended 30 June 2018.
Amounts due for settlement within less than 12 months (current liabilities)
Amounts due for settlement in more than 12 months (non-current liabilities)
Maturity analysis
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Consolidated
2019
$’000
2,632
9,309
Consolidated
2019
$’000
2,632
9,309
–
11,941
The lease liabilities are interest bearing at a rate of 6% based on the interest rates implicit in the lease contract. There are options to
extend included in several of the lease contracts held. However, these options are not expected to be exercised based on current
business operations. There are no other future cash flows anticipated in relation to leases held which have not been disclosed in the
financial statements. As at 30 June 2019, there are no other leases which have not commenced but a commitment has been made.
The Group does not face a significant liquidity risk in relation to its lease liabilities.
Note 19. Lease commitments
Lease commitments – operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$’000
2018
$’000
–
–
–
3,035
11,027
14,062
Operating lease commitments includes contracted amounts for offices and equipment under non-cancellable operating leases
expiring within one to ten years with, in some cases, options to extend. The leases have various escalation clauses. On renewal,
the terms of the leases are renegotiated.
Following the early adoption of AASB 16 Leases, (see note 2), significant property leases previously reported as operating leases
are now recognised as finance leases. The maturity analysis for lease liabilities as at 30 June 2019 is detailed in note 18.
79
ELMO ANNUAL REPORT 2019 Note 20. Trade and other payables
Trade payables and accruals
Other payables
Loans from a related party
Consolidated
2019
$’000
4,506
2,780
–
7,286
2018
$’000
3,773
838
25
4,636
Note 21. Business combinations and acquisitions of business assets
During the year the Company acquired interests in HROnboard and BoxSuite (2018: Quinntessential Marketing Consulting (QMC),
Sky Payroll and Pivot Software). Key information on the acquisitions is summarised in the table below:
Net fixed assets
Cash
Customer list intangible asset
Software intangible asset
Trademark intangible asset
Other assets
Deferred revenue
Deferred tax liability
Loans repaid to previous shareholders
Other liabilities
Net identifiable (liabilities)/assets acquired
Goodwill on acquisition
Acquisition-date fair value of the
total consideration transferred
Acquired in the year ended
30 June 2018
Acquired in the year ended
30 June 2019
QMC
$’000
Sky Payroll
$’000
Pivot Software
$’000
HROnboard
$’000
BoxSuite
$’000
14
10
3,020
1,053
134
599
(1,501)
(946)
–
(50)
2,333
9,718
–
–
–
324
–
–
–
–
–
–
324
1,476
63
481
3,565
1,736
108
697
(1,779)
(1,102)
(3,551)
(463)
(245)
8,115
1
332
1,806
1,580
337
498
(1,303)
(1,117)
(948)
(426)
760
14,123
–
13
15
1,179
–
9
–
(358)
–
(4)
854
546
12,051
1,800
7,870
14,883
1,400
During the financial year ended 30 June 2019 the following payments were made in relation to deferred consideration for business
combinations in the prior year:
Acquired entity
QMC
Sky Payroll
Pivot Software
Consideration
settled in shares
$’000
Consideration
settled in cash
$’000
–
–
393
4,000
400
931
As at 30 June 2019, consideration has been settled in final in relation to the prior year acquisitions in QMC and Pivot Software, with
consideration for Sky Payroll to be finalised during the year ending 30 June 2020.
80
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 HROnboard
On 31 January 2019 the Company completed the purchase of HROnboard Pty Limited (‘HROnboard’), one of Australia’s leading
providers of cloud-based employee onboarding software for an estimated total consideration of $10.0m with an initial amount of
$7.0m paid on completion and a deferred cash payment of $3.0m. The vendor is eligible for an additional conditional cash payment
(estimated to be $5.5m) which will be subject to achieving a range of certain high growth performance targets.
Total consideration payable is subject to adjustments relating to cash, debt and working capital.
The onboarding process is an essential function of the employee’s lifecycle within an organisation and the acquisition of
HROnboard strategically strengthens ELMO’s position as a leading provider of SaaS onboarding solutions in the Australian market.
Goodwill has arisen through this acquisition from synergies, the opportunities for cross-selling and ability to provide a broader
product suite to offer to the market.
BoxSuite
On 31 January 2019 the Company completed the purchase of Get BoxSuite Pty Limited (‘BoxSuite’), a SaaS, cloud-based specialist
in workplace rostering and time and attendance for casual and shift-based employees, for a total consideration of $1.4m with an
initial amount of $1.0m paid on completion and $0.4m deferred based on agreed milestones.
BoxSuite’s rostering module enables organisations to schedule shifts and monitor staff costs while its time and attendance modules
enable organisations to efficiently record and manage employee hours, calculate appropriate remuneration rates, and seamlessly
integrate with external payroll platforms.
The acquisition of BoxSuite is firmly in line with ELMO’s growth strategy to supplement the Company’s strong organic growth with
complementary technology to offer customers an integrated product suite of HR and payroll solutions.
Results for each acquisition included in the consolidated statement of comprehensive income for the current and prior reporting
period since the appropriate acquisition date for each transaction as stated above are as follows:
Year ended 30 June 2019
HROnboard
BoxSuite
Year ended 30 June 2018
QMC
Sky Payroll
Pivot Software
Revenue
$’000
Loss after tax
$’000
1,004
5
2,161
61
1,235
(476)
(565)
(206)
(315)
(263)
If the acquisition date for all acquisitions that occurred during the year had been as of the beginning of the annual reporting period,
the results for ELMO Software Limited, being the combined entity including a full year of results for HROnboard and BoxSuite
(2018: QMC, Sky Payroll and Pivot Software) would have been:
Revenue
Loss before tax
2019
$’000
42,600
(11,400)
2018
$’000
31,800
(1,900)
The Group incurred costs of $0.55m (2018: $1.16m) in relation to all acquisitions made during the year. These costs have been
included in business acquisition expenses.
81
ELMO ANNUAL REPORT 2019 Note 22. Employee benefits: current liabilities
Employee benefits
Consolidated
2019
$’000
1,939
2018
$’000
1,010
The current provision for employee benefits includes all unconditional entitlements where employees have completed the required
period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is
presented as current, since the consolidated entity does not have an unconditional right to defer settlement.
Note 23. Contract liabilities
Contract liabilities
Current
Non-current
Note 24. Deferred tax: non-current liabilities
Consolidated
2019
$’000
2018
$’000
19,910
382
13,782
–
As at
1 July 2018
$’000
Prior year
adjustments
(Note 2)
$’000
Recognised
in profit or
loss (Note 9)
$’000
Acquired
in business
combinations
(Note 21)
$’000
As at
30 June 2019
$’000
172
(2)
(1)
(1,514)
–
13
554
476
(1,941)
59
(73)
84
189
342
–
–
841
(801)
–
–
–
–
(3,101)
–
–
–
–
–
–
–
–
–
316
3,101
–
316
44
1
9
(888)
(363)
(6)
(185)
(119)
216
76
–
100
415
206
(164)
482
(841)
–
–
–
–
–
–
–
–
(546)
(828)
(101)
–
–
–
–
–
–
216
(1)
8
(2,402)
(3,464)
7
369
357
(2,271)
(693)
(174)
184
604
548
152
3,583
–
(1,017)
(1,475)
(2,977)
Year ended 30 June 2019
Provision for doubtful debts
Prepayments
Property, plant and equipment
Intangibles
Right-of-use assets
Blackhole expenses
IPO costs
Transaction costs on share issue
Acquired on business combination:
Customer list
Capitalised software development costs
Trademarks
Superannuation payables
Accruals
Provision for employee benefits
Contract liabilities
Lease liabilities
R&D tax incentive
Deferred tax assets/(deferred tax liabilities)
82
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 The Group has decided not to book the 2019 refundable Research and Development tax offset carried forward of $3,622,740 as a
deferred tax asset, until there is a reasonable certainty that sufficient future taxable income will be available. The Group has also
reversed the 2018 non-refundable Research and Development tax offset carried forward of $841,312 in the 2019 year.
The Group has decided not to book the deferred tax asset impact arising from the total tax losses carried forward of $451,339, until
there is a reasonable certainty that sufficient future taxable income will be available. ELMO is considering tax consolidation in FY20
and no tax losses for acquired subsidiaries have been recognised as the available fraction of tax losses has not been calculated.
Year ended 30 June 2018
Provision for doubtful debts
Prepayments
Property, plant and equipment
Intangibles
Blackhole expenses
IPO costs
Transaction costs on share issue
Acquired on business combination:
Customer list
Capitalised software development costs
Trademarks
Superannuation payables
Accruals
Employee benefits
Carried forward non-refundable R&D tax incentive
Deferred tax assets/(deferred tax liabilities)
As at
1 July 2017
$’000
Recognised
in profit or
loss (Note 9)
$’000
Recognised
in equity
(Note 9)
$’000
Acquired
in business
combinations
$’000
As at
30 June 2018
$’000
135
–
34
(1,060)
758
–
–
(110)
–
–
71
40
231
–
99
37
(2)
(35)
(454)
(745)
108
(119)
144
59
–
13
149
111
841
107
–
–
–
–
–
446
595
–
–
–
–
–
–
–
–
–
–
–
–
–
–
172
(2)
(1)
(1,514)
13
554
476
(1,975)
(1,941)
–
(73)
–
–
–
–
59
(73)
84
189
342
841
(801)
1,040
(2,048)
Note 25. Employee benefits: non-current liabilities
Employee benefits
Note 26. Financial risk management
The Group has exposure to the following risks arising from financial assets and liabilities:
• Credit risk
• Liquidity risk
• Market risk
Consolidated
2019
$’000
172
2018
$’000
128
Risk management framework
The Company’s board of directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The board of directors has established the Audit and Risk committee, which includes responsibility for developing and
monitoring the Group’s risk management policies. The committee reports regularly to the board of directors on its activities.
83
ELMO ANNUAL REPORT 2019 Note 26. Financial risk management (continued)
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect
changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures,
aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The role of the Audit and Risk Committee for the Group is to:
• Provide oversight of the integrity of internal financial reporting and the external financial statements;
• Review the effectiveness of the internal financial controls;
• Review the independence, objectivity and performance of the external auditors; and
• Provide guidance on risk management.
The Group maintains a comprehensive risk exposure matrix which is regularly reviewed, monitored and updated. As part of the risk
management strategy the Group constantly evaluates risk and risk acceptance.
Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument fails to meet
its contractual obligations; related to trade receivables and lease receivables for the Group.
The average credit period on sales of products and services is 30 days. No interest is charged on outstanding trade receivables.
The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses. The
expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis
of the debtors current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the
industry and an assessment of both current and forecast conditions.
New customers are typically invoiced in advance of their contract commencing with annual renewals also being due for payment
in advance of the renewal anniversary. Receivables held are monitored on an ongoing basis to minimise the Group’s exposure.
The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables (see note 11) and lease
receivables (note 17).
Expected credit loss rates and allowances for expected credit losses are as follows:
Expected
credit loss rate
Carrying amount
Allowance for expected
credit losses
2019
%
–
14%
52%
2018
%
–
6%
48%
2019
$’000
4,192
5,392
1,431
11,015
2018
$’000
3,395
2,366
1,565
7,326
2019
$’000
–
731
744
1,475
2018
$’000
–
144
758
902
Neither past due nor impaired
0 to 3 months overdue
3 to 6 months overdue
Total
84
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional/(reduction in) provisions recognised
Closing balance
Consolidated
2019
$’000
902
573
1,475
2018
$’000
914
(12)
902
Liquidity risk
Liquidity risk is the risk that the consolidated entity will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by cash or other financial asset. The consolidated entity’s approach to managing liquidity is to ensure,
as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the consolidated entity’s reputation. This risk is managed
through constant monitoring of cash resources and future obligations.
The Group currently does not hold debt and has a cash balance of $27.7m at 30 June 2019. In the event that further resources are
required the Group has the potential to raise additional funds through a capital raising and/or acquire debt.
Interest rate risk
As the Group does not currently hold debt, the only significant liabilities which are subject to interest rate risk are lease liabilities
held. The interest charged on these liabilities is implicit in the lease and is fixed for all leases currently held and committed.
Market risk: Currency risk
The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when
revenue or expense is denominated in a different currency from the Group’s presentation currency) and the Group’s net investment
in foreign subsidiaries.
ELMO’s financial statements are presented in Australian Dollars with only a small proportion of sales denominated in overseas
currencies as denoted under note 3 Revenue from rendering of services and these transactions are conducted at spot rates as
necessary in normal operations.
The Group’s assets and liabilities at balance date denominated in foreign currencies is:
Assets
Current
Non-current
Liabilities
Current
Non-current
New Zealand
Dollar
$’000
Singapore
Dollar
$’000
2,434
4,442
(2,270)
(3,432)
127
–
–
(620)
Movements in foreign exchange rates are unlikely to have a significant impact on the Group’s financial performance.
85
ELMO ANNUAL REPORT 2019 Note 27. Equity – share capital and reserves
Ordinary shares issued and fully paid
At 1 July 2017
Shares issued under business combinations
Shares issued under Institutional Placement
Shares issued under Share Purchase Plan
Less: Capitalised share placement costs (net of tax)
At 30 June 2018
At 1 July 2018
Shares issued under business combinations – deferred consideration from acquisition
in the prior period
At 30 June 2019
Shares
$’000
54,171,584
465,827
8,333,334
189,341
25,110
2,150
45,000
1,022
–
(942)
63,160,086
72,340
63,160,086
72,340
72,373
63,232,459
393
72,733
Ordinary shares
Issue of ordinary shares
No shares were issued in relation to business’ acquired in the current year. However ordinary shares were issued as deferred
consideration for prior year acquisitions as follows:
Year ended 30 June 2019
30 July 2018
31 January 2019
Pivot Software (3)
Pivot Software (4)
Year ended 30 June 2018
1 February 2018
13 March 2018
30 April 2018
Sky Payroll
Pivot Software (1)
Pivot Software (2)
Number
Issue price
$’000
41,101
31,272
72,373
141,643
290,429
33,755
465,827
$5.53
$5.31
$3.53
$5.05
$5.43
227
166
393
500
1,467
183
2,150
See note 21 for further detail regarding acquisitions during the year.
Shares issued in the year ended 30 June 2018
On 28 March 2018, the Company issued 8,333,334 ordinary shares under an institutional placement at a price of $5.40 per share.
Additionally, 189,341 shares were issued under the share purchase plan for eligible existing shareholders at a price of $5.40.
On 5 April 2018, the company offered existing ELMO shareholders the opportunity to acquire additional shares in ELMO at a
fixed price of $5.40 per share. Existing shareholders with registered addresses in Australia or New Zealand on 26 March 2018
being the record date will be entitled to subscribe for up to $15,000 in new ELMO shares through the share purchase plan.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to
the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not
have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
86
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the
cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total
borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. For the current and prior periods,
no dividends have been paid or proposed.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current company’s share price at the time of the investment.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
Nature and purpose of reserves
Reserves
Foreign exchange translation reserve
Share options reserve
Consolidated
2019
$’000
5
831
836
2018
$’000
(47)
205
158
(i) Foreign exchange translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations.
(ii) Share options reserve
The share options reserve comprises the value of the share-based payment arrangements recognised in equity.
Note 28. Equity – accumulated losses
Accumulated losses at the beginning of the financial year
AASB 15 Revenue from contracts with customers, adjustment, net of tax (note 2)
AASB 16 Leases, adjustment, net of tax (note 2)
Loss after income tax benefit for the year
Accumulated losses at the end of the financial year
Note 29. Equity – dividends
There were no dividends paid or proposed for the year ended 30 June 2019 (2018: $nil).
Consolidated
2019
$’000
2018
$’000
(4,286)
(1,298)
(736)
30
(13,180)
(18,172)
–
–
(2,988)
(4,286)
87
ELMO ANNUAL REPORT 2019 Note 30. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payment
Consolidated
2019
$’000
3,734
145
266
4,145
2018
$’000
2,727
136
138
3,001
Further details of the compensation made to directors and other key management personnel are included in the remuneration
report within the Directors’ report.
Note 31. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of
the company, its network firms and unrelated firms:
Audit services – Deloitte Touche Tohmatsu
Audit of the financial statements
Other due diligence services – Deloitte Touche Tohmatsu
Consolidated
2019
$
2018
$
239,000
103,000
110,000
349,000
330,000
433,000
During the financial year the following fees are payable for services provided by Mann & Associates
PAC as auditors and Hawksford as accountants for ELMO Talent Management Software Pte Limited:
Audit services – unrelated firms
Audit of the financial statements for ELMO Talent Management Software Pte Limited
5,435
4,800
Other services – unrelated firms
Accountancy fees for ELMO Talent Management Software Pte Limited
7,191
12,626
7,400
12,200
Note 32. Related party transactions
Parent entity
ELMO Software Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 30 and the remuneration report included in the
directors’ report.
88
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Loans to/from related parties
In the year ended 30 June 2019, a loan payable of $24,564 with one of its shareholders was written off to the profit or loss and
$948,000 of loans were repaid to the former shareholders of HROnboard. In the prior year, the Company repaid $3.551m loans
to the former shareholders of Pivot.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax benefit
Total comprehensive loss
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Parent
2019
$’000
(11,946)
(11,946)
Parent
2019
$’000
33,634
103,676
27,208
44,887
72,733
822
(14,766)
58,789
2018
$’000
(1,361)
(1,361)
2018
$’000
61,417
97,426
24,181
26,968
72,340
205
(2,087)
70,458
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for
the following:
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
• Dividends received from subsidiaries are recognised as other income by the parent entity.
89
ELMO ANNUAL REPORT 2019
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in
accordance with the accounting policy described in note 1:
Ownership interest
Name
Principal place of business/
Country of incorporation
ELMO Accredited Pty Limited
ELMO Talent Management Software Pty Limited
International Colleges Pty Limited
Studywell College Pty Limited
Techni Works Pty Limited
Techniworks Action Learning Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Quinntessential Marketing Consulting Pty Limited
Australia
ELMO Talent Management Software Pte Limited
Singapore
ELMO Software Limited
ELMO New Zealand Holdings Limited
Pivot Remesys Group Holdings Limited
Pivot Remesys IP Limited
Pivot Remesys Limited
Pivot Remesys Pty Limited
HROnboard Pty Limited
Get BoxSuite Pty Limited
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
2019
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2018
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
Note 35. Events after the reporting period
There is no other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
90
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Note 36. Reconciliation of loss after income tax to net cash from
operating activities
Loss after income tax benefit for the year
Adjustments for:
Amortisation and depreciation
Bad debt expense
Transaction costs
Loss on disposal of assets
Rental expenses
Share based payment
Adjustments to revenue arising from adoption of AASB 15
Other expenses
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in other assets
Decrease in lease incentive
Decrease in income tax refundable
Increase in deferred tax liabilities
Increase in trade and other payables
Increase in employee benefits
Increase in contract liabilities
Increase in lease payables
Net cash from operating activities
Note 37. Earnings per share
Earnings per share for profit from continuing operations
Loss after income tax
Basic earnings per share
Diluted earnings per share
Consolidated
2019
$’000
2018
$’000
(13,180)
(2,988)
9,437
894
545
–
–
626
(546)
3
(4,029)
620
1,290
(196)
853
3,324
685
4,779
366
5,471
4,438
787
–
158
460
205
–
(354)
(3,415)
(727)
–
396
(231)
2,236
369
3,049
–
4,383
Consolidated
2019
$’000
2018
$’000
(13,180)
(2,988)
Cents
(20.85)
(20.85)
Cents
(5.29)
(5.29)
The calculation of EPS has been based on the following loss attributable to ordinary shareholders and weighted average number of
ordinary shares outstanding.
There are no adjustments in relation to the effects of all dilutive potential ordinary shares due to the current loss-making position of
the Group for the current financial year.
91
ELMO ANNUAL REPORT 2019 Note 37. Earnings per share (continued)
Weighted average number of ordinary shares used in calculating basic earnings per share
63,210,660
56,517,696
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
–
–
Weighted average number of ordinary shares used in calculating diluted earnings per share
63,210,660
56,517,696
Number
Number
Note 38. Share-based payment arrangement
Description of share-based payment arrangement
As at 30 June 2019 the Group had the following share-based payment arrangements in place.
Share options (equity-settled)
ELMO has established both a Senior Executive Plan (SEEP) and a High Performer Equity Plan (HPEP) as part of its long term
incentive (LTI) Program.
Equity incentives under the SEEP or the HPEP may be granted to employees (or such other person that the Board determines is
eligible to participate) in respect of FY18 and beyond. Offers will be made at the discretion of the Board. The terms of the incentives
granted under these plans will be determined by the Board at grant and may therefore vary over time. ELMO will regularly assess
the appropriateness of its incentive plans and may amend or replace, suspend or cease using either or both of the SEEP or HPEP
if considered appropriate by the Board.
The Senior Executive Equity Plan (SEEP)
The SEEP is intended to align the interests of the senior executives with Shareholders. Awards under the SEEP will be structured as
an option to receive Shares at a future date subject to the recipient paying the exercise price (SEEP Option). The rules of the SEEP
will provide the Board with the flexibility to award restricted shares, performance rights and options, and to cash settle any award,
at the discretion of the Board.
Grants under the SEEP are expected to be made annually and will be made to the senior executive team and such other executives
as the Board may determine from time to time. Any grants will be made subject to the ASX Listing Rules, to the extent applicable.
The High Performer Equity Plan (HPEP)
The Plan is designed to link to performance, encourage retention, reward tenure and provide High Performers with participation in
the Company.
Awards under the Plan will be structured as an option to receive shares on a certain date in the future subject to the participant paying
the exercise price. The Plan rules will provide the Board the flexibility to award restricted shares, performance rights and options,
and to cash settle any Award. Grants will be made to the High Performers and such other executives as the Board may determine.
92
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Grant date/employees entitled
No of options
granted and
outstanding
as at
30 June 2018
Granted
Cancelled
No of options
outstanding
as at
30 June 2019
Vested
Options granted to key management personnel under SEEP
17 October 2017
7 December 2017
29 October 2018
23 November 2018
27 March 2019
Total SEEP options
Options granted to personnel under HPEP
17 October 2017
11 December 2017
9 March 2018
12 June 2018
5 November 2018
25 February 2019
Total HPEP options
Total options
398,712
119,019
–
–
–
–
–
223,247
61,538
24,614
–
398,712
105,099
(87,646)
31,373
31,373
–
223,247
(61,538)
–
–
24,614
–
–
–
517,731
309,399
(149,184)
677,946
136,472
202,902
8,735
22,260
8,820
–
–
–
–
–
–
455,354
7,885
242,717
463,239
–
–
–
–
–
–
–
202,902
8,735
22,260
8,820
455,354
7,885
705,956
–
–
–
–
–
–
–
760,448
772,638
(149,184)
1,383,902
136,472
There is a vesting condition relevant to all share options under the SEEP and HPEP that the participant must be employed at the
vesting date. The conceptual life of the options/maximum term is 10 years.
As at 30 June 2019 none of the options have been exercised (2018: none vested or exercised).
An expense of $626,000 (2018: $205,000) in relation to the share options granted has been recognised in the statement of profit
or loss with a corresponding increase to the share payment reserve in the year ended 30 June 2019.
Measurement of fair values
Share options (equity-settled)
The fair value of the employee share options under the SEEP has been measured using the Monte Carlo simulation approach
subject to the total shareholder returns (TSR) performance criteria.
The fair value of the employee share options under the HPEP has been measured using the Binomial option pricing model.
Non-market performance conditions attached to the arrangements were not taken into account in measuring fair value in
accordance with accounting standards.
93
ELMO ANNUAL REPORT 2019 Note 38. Share-based payment arrangement (continued)
Measurement of fair values (continued)
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:
Share options plans
SEEP
HPEP
For the year ended 30 June 2019
Tranche 1
Tranche 2
Tranche 3
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted-average)
Expected life
Expected dividends
Risk-free interest rate
$1.18
$5.50
$5.50
37%
$1.50
$5.50
$5.50
37%
$1.76
$5.50
$5.50
37%
5 Nov
2018
$1.64
$5.50
$5.50
37%
25 Feb
2019
$1.64
$5.50
$5.50
37%
2.7 years
3.7 years
4.7 years
3.5 years
3.5 years
0%
2.05%
0%
2.14%
0%
2.25%
0%
2.11%
0%
2.11%
Share options plans
SEEP
HPEP
Grant Date
For the year ended 30 June 2018
Tranche 1
Tranche 2
Tranche 3
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted-average)
$0.51
$2.50
$2.51
40%
$0.66
$2.50
$2.51
40%
$0.78
$2.50
$2.51
40%
17 Oct
2017
11 Dec
2017
$0.79
$2.50
$2.51
40%
$0.79
$3.60
$2.51
40%
9 Mar
2018
$1.44
$5.80
$5.08
40%
12 Jun
2018
$1.44
$5.50
$5.08
40%
Expected life
Expected dividends
Risk-free interest rate
2.7 years
3.7 years
4.7 years
2.7 years
2.7 years
2.7 years
2.7 years
0%
1.88%
0%
2.02%
0%
0%
0%
0%
0%
2.14%
1.88%
1.88%
1.88%
1.88%
Volatility is a measure of price variation of a financial instrument over the life of the award. Since ELMO is newly listed on the ASX,
there is no sufficient market data to measure the historical volatility and there are no publicly traded options over the company’s
ordinary shares. Therefore this valuation has based the expected volatility on average annualised historical volatility of constituents
in S&P/ASX 300 Software & Services Industry Index over the three year period to the valuation date.
ELMO’s current policy is not to distribute dividends but rather reinvest in the growth of the company hence zero dividend yield is
used in this valuation report.
94
ELMO ANNUAL REPORT 2019Notes to the financial statements30 June 2019 Directors’ declaration
30 June 2019
1. In the opinion of the directors of ELMO Software Limited (the ‘Company’):
a. The consolidated financial statements and notes that are set on pages 62 to 94 and the Remuneration report on pages 43
to 54 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the Group’s financial position as at 30 June 2019 and its performance for the financial year
ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001: and
b. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive
officer and chief financial officer for the financial year ended 30 June 2019.
3. The directors draw attention to Note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Barry Lewin
Chairman
15 August 2019
Sydney
Danny Lessem
Director
95
ELMO ANNUAL REPORT 2019
Independent auditor’s report
to the members of ELMO Software Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor's Report to the
Members of Elmo Software Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Elmo Software Limited (the “Company”) and its subsidiaries (the
“Group”), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulation 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor's report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
96
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
65
ELMO ANNUAL REPORT 2019 Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key Audit Matters
Revenue Recognition – rendering of services
($40.1m)
Refer to the description of accounting principles and Note
4.
For the year ended 30 June 2019, $40.1 million was
recognised by the Group from rendering of services.
As the Group continues to expand, and its software
offering evolves, there is a considerable risk associated
with recognizing its services revenue.
A significant level of judgment is required in ensuring the
relevant revenue recognition criteria is met as per the
relevant accounting standard. This judgment and manual
nature could affect the timing and quantum of revenue
recognized in each period.
How the scope of our audit responded to the
Key Audit Matter
Our audit procedures included, but were not
limited to:
• Obtaining an understanding of all the revenue
streams and the appropriateness of the
Group’s principles in determining that the
revenue recognized is in accordance with the
criteria outlined in the relevant accounting
standards;
•
•
•
•
•
Assessing the key controls in relation to the
recognition and measurement of revenue;
process for recording accounts receivable and
assessing the provision for doubtful debts to
identify and test relevant internal controls;
Testing on a sample basis,
revenue
transactions by assessing management’s
calculations against the relevant criteria and
tracing to agreements with clients;
Testing journal entries posted to revenue
accounts to identify any unusual items;
Testing on a sample basis the completeness
of credit notes issued post year end; and
Reconciling the deferred revenue balance as
invoice
at 30
amortisation
any
exceptions.
June 2019 using
the
noting
schedule,
Business combinations
Refer to Note 21.
During the financial year ended 30 June 2019, the Group
acquired the following:
•
•
On 31 January 2019, 100% of the voting rights of
HROnboard, for a total consideration of $15.5
million.
On 31 January 2019, 100% of the voting rights of
Get BoxSuite, for a total consideration of $1.4
million.
We also assessed the appropriateness of the
disclosures in Note 4 to the financial statements.
Our audit procedures included, but were not
limited to:
•
•
Understanding
the sales and purchase
agreement terms and conditions of the
acquisition and evaluating management’s
application in accordance with the relevant
accounting standard;
Evaluating the methodology and assumptions
utilised to identify and determine the fair
intangible
value of separately
assets;
identified
66
97
ELMO ANNUAL REPORT 2019 Key Audit Matters
The accounting for a business combination can be
complex and involves several significant
judgments and estimates including:
•
•
The determination of the fair value of the contingent
consideration;
The determination of separately
intangible assets; and
identifiable
•
•
• Measurement of
identifiable
intangible assets including customer relationships,
trademarks and Software.
separately
the
How the scope of our audit responded to the
Key Audit Matter
•
Assessing whether there have been any
the underlying
significant
performance of the business acquired;
changes
to
Assessing the useful economic life of software
and customer list intangibles acquired; and
Confirming the estimation of the contingent
consideration was in accordance with the sale
terms and
and purchase agreement
conditions,
key
assumptions such as revenue growth rates
used in the forecasts.
challenging
and
the
We also assessed the appropriateness of the
disclosures
financial
statements.
in Note 21
the
to
Goodwill impairment
Our procedures included, but were not limited to:
Refer Note 15
The Group has $36.1 million of Goodwill as at 30 June
2019.
The Group performed an impairment assessment which
requires significant judgements over the goodwill balance
by:
•
Determining the cash generating unit (CGU) and the
amount of goodwill attributed
from business
combinations.
•
•
•
•
Obtaining an understanding of the budgeting
process and approvals of the budget by the
board;
Assessing
impairment model process;
the key controls over
the
Evaluating the Group’s categorization of
CGUs and the allocation of goodwill to the
carrying value of a CGU based on our
understanding of the Group’s business. This
evaluation included performing an analysis of
the Group’s internal reporting; and
Engaging with our valuation specialists to
assist with challenging the key assumptions
adopted by management in their fair value
less cost of disposal valuation approach
including:
•
•
assessing the comparable companies
identified; and
the appropriate revenue multiple
determined as a consequence.
We also assessed the appropriateness of the
disclosures
financial
statements.
in Note 15
the
to
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Directors’ Report and ASX Additional Information, which we obtained prior to the date of
this auditor’s report, and also includes the following information which will be included in the annual report
(but does not include the financial report and our auditor’s report thereon): Company Description,
Chairman’s message, CEO’s overview and other Company information, which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon.
98
67
ELMO ANNUAL REPORT 2019Independent auditor’s reportto the members of ELMO Software Limited In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of this auditor’s report,
we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
When we read the Company Description, Chairman’s message, CEO’s overview and other Company
information, if we conclude that there is a material misstatement therein, we are required to communicate
the matter to the directors and use our professional judgement to determine the appropriate action.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional skepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
68
99
ELMO ANNUAL REPORT 2019 auditor's report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
•
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our
audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor's report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 43 to 54 of the Directors' Report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of Elmo Software Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Sydney, 15 August 2019
100
69
ELMO ANNUAL REPORT 2019Independent auditor’s reportto the members of ELMO Software Limited Shareholder information
as at 1 October 2019, post capital raise
Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not disclosed elsewhere in
the Report is set out below.
1. In accordance with the 3rd edition ASX Corporate Governance Council’s Principles and Recommendations, the
2019 Corporate Governance Statement, as approved by the Board, is available on the Company’s website at:
http://investors.elmotalent.com.au/Investors/?page=Corporate-Governance. The Corporate Governance Statement sets out the
extent to which ELMO Software Limited has followed the ASX Corporate Governance Council’s 29 Recommendations during the
2019 financial year.
2. Substantial shareholders.
The number of securities held by substantial shareholders and their associates (as disclosed to the ASX) are set out below:
Name
JLAB Investments (No. 2) Pty Limited
Lessem Trading Pty Ltd
Number
%* Date lodged
13,655,865
10,823,149
18.86
24/09/2019
14.95
24/09/2019
Bessie Garber and Manuel Garber as trustees of the Garber Family Trust
9,656,482
13.34
24/09/2019
Immersion Capital Master Fund Ltd
12,108,910
16.72
26/09/2019
* % of issued capital as at the date the notice was lodged.
3. Number of security holders and securities on issue
ELMO Software Limited has issued the following securities: 72,415,619 fully paid ordinary shares held by 4,192 shareholders.
4. Voting rights
Ordinary shares
In accordance with the EMLO Software Limited Constitution and subject to any rights or restrictions attached to any class of shares,
at a meeting of members:
• on a show of hands, each shareholder has 1 vote; and
• on a poll, each fully paid share held by a shareholder has 1 vote.
5. Distribution of security holders
a. Quoted and unquoted securities
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Fully paid Ordinary shares
(quoted and unquoted)
Holders
Shares
2,737
1,236
130
69
20
1,225,590
2,841,836
937,680
1,397,637
66,012,876
4,192
72,415,619
%
1.69
3.92
1.29
1.93
91.16
100%
101
ELMO ANNUAL REPORT 2019 Shareholder information
as at 1 October 2019, post capital raise
b. Quoted securities
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Fully paid Ordinary shares (quoted)
Holders
Shares
2,737
1,236
130
69
19
1,225,590
2,841,836
937,680
1,397,637
65,871,233
4,191
72,273,976
%
1.70
3.93
1.30
1.93
91.14
100%
6. Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 139 based on ELMO Software Limited’s
closing share price of $6.40, on 1 October 2019.
7. Twenty largest shareholders of quoted and unquoted equity securities Fully paid ordinary shares
Details of the 20 largest shareholders by registered shareholding are:
Rank Name
JLAB Investments (No. 2) Pty Ltd
J P Morgan Nominees Australia Pty Limited
Lessem Trading Pty Ltd
Mr Manuel Garber & Mrs Bessie Garber
HSBC Custody Nominees (Australia) Limited – A/C 2
Citicorp Nominees Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
CS Fourth Nominees Pty Limited
Brispot Nominees Pty Ltd
Xin Sun
Gordon Starkey
Mr Trevor Lonstein
Mr Darryl Justin Garber
UBS Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Christopher James Youngman & Paul Roger Hartland & Phillipa Joanne Youngman
Truebell Capital Pty Ltd
Neweconomy Com AU Nominees Pty Limited
The Aussie Mall Pty Ltd
Laumark Pty Ltd
Mr Timothy Andrew Graham & Mrs Kathy Margaret Graham
01 Oct 2019
13,655,865
11,809,604
10,823,149
9,656,482
8,959,720
3,106,536
2,684,502
858,096
712,715
643,367
425,695
420,695
420,695
420,695
355,920
292,269
242,197
215,000
168,031
141,643
91,602
90,000
% IC
18.86
16.31
14.95
13.33
12.37
4.29
3.71
1.18
0.98
0.89
0.59
0.58
0.58
0.58
0.49
0.40
0.33
0.30
0.23
0.20
0.13
0.12
Total
66,194,478
Balance of register
6,221,141
91.41
8.59
Grand total 72,415,619
100.00
1
2
3
4
5
6
7
8
9
10
11
12
12
12
13
14
15
16
17
18
19
20
102
ELMO ANNUAL REPORT 2019
8. Name of the Company Secretary: Anna Sandham.
9. The details of the Company’s registered office are:
Address: Level 12, 680 George Street, Sydney NSW 2000.
Telephone: 02 8280 7355
The details of the Company’s principal administrative office are:
Address: Level 27, 580 George Street, Sydney NSW 2000
10. The address and telephone number of the office at which a register of securities is kept:
Link Market Services Limited
Address: Level 12, 680 George Street, Sydney NSW 2000
Telephone: 02 8280 7288
11. ELMO Software Limited securities are not quoted on any other stock exchanges other than the ASX.
12. The number and class of restricted securities or securities subject to voluntary escrow that are on issue
and the date that the escrow period ends are set out below:
Class of Securities
Fully paid ordinary shares
No. of shares
Escrow period
141,643
1 February 2020
13. Unquoted securities
Details of the unquoted securities on issue are as follows:
a. ASX restricted securities
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Options (unquoted)
Holders
Shares
–
21
41
53
–
–
60,008
294,406
1,178,672
–
%
–
3.91%
19.20%
76.88%
–
115
1,533,086
100.00%
14. Review of operations and activities
A review of ELMO Software Limited’s operations during the period is provided within the Directors’ Report of the Annual Report.
15. On market buy-back
There is no current on market buy-back.
16. Details of investments
N/A – ELMO Software Limited is not an investment company.
17. The following is a summary of any issues of securities approved for the purposes of Item 7 of section 611
of the Corporations Act which have not yet been completed.
N/A
18. No securities were purchased on-market during the reporting period ended 30 June 2019.
103
ELMO ANNUAL REPORT 2019 Risk statement
The Group’s operations and financial results are subject to a number of risks. Some of these risks are not directly under ELMO’s
control. The key risks affecting ELMO, and the steps taken to mitigate these risks are described below, in no particular order. These
risks are a summary only of some of the risks that ELMO considers to be key to its business, and the summary is not, and it does not
purport to be, an exhaustive list of all of the risks associated with the Group or an investment in ELMO shares. There is no guarantee
or assurance that the risks will not change or that other risks or matters that may adversely impact ELMO’s business, the industry in
which it operates or an investment in ELMO shares, will not emerge. Should this arise, ELMO is under no obligation to update its
summary of key risks and investors are urged to exercise caution before investing in ELMO shares.
Failure to retain
existing customers
and attract new
customers
The success of ELMO’s business relies on its ability to attract new customers and to retain and increase
revenue from existing customers.
ELMO’s customers have no obligation to renew their service offering when their contract term ends and
ELMO cannot guarantee that all or any of its customers will renew their current service offering after the
completion of their contract term. ELMO also cannot guarantee that it will successfully increase revenue
from its existing customers through the ability to cross-sell other modules to the same customers.
If customers do not continue to use ELMO’s platform and do not increase their usage over time, and if new
customers do not choose to use ELMO’s platform, the growth in ELMO’s revenue may slow, or decline,
which will have an adverse impact on ELMO’s operating and financial performance.
Ability to attract and
retain key personnel
A perceived critical component of the success of the Company is the ongoing retention of key personnel,
specifically, founder and CEO, Danny Lessem, and members of the senior management, sales and product
research and development teams.
Reliance on ELMO’s
software solutions
and failure to
adequately maintain
and develop it
Reliance on up-
take of SaaS-based
talent management
software solutions
Failure to effectively
manage growth
There is a risk ELMO may not be able to attract and retain key personnel or be able to find effective
replacements for those key personnel in a timely manner. The loss of such personnel, or any delay in their
replacement, could have a significant negative impact on management’s ability to operate the business
and achieve financial performance targets and strategic growth objectives.
ELMO’s business model depends on ELMO’s ability to continue to ensure that ELMO’s customers are
satisfied with the functionality of ELMO’s talent management software solutions. The market for talent
management software solutions is subject to evolving industry standards, changing regulations as well
as ever changing customer needs, requirements and preferences. ELMO’s success will depend on its
ability to adapt and respond effectively to these changes on a timely basis. There is a risk that ELMO
may fail to maintain its software platform adequately or that future updates may introduce errors and
performance issues causing customer satisfaction to fall. Any of these factors may result in reduced sales
and usage of ELMO’s solutions, loss of customers, damage to ELMO’s reputation and an inability to attract
new customers.
ELMO’s future revenue and growth depends on the increasing adoption of SaaS-based talent
management software solutions. It may be difficult for ELMO to persuade potential customers to change
their existing legacy on premise, manual paper-based or point solution and adopt SaaS-based talent
management solutions like ELMO’s. If ELMO’s solutions are not accepted and used by more mid-market
organisations or if the market for talent management solutions fails to grow as expected, ELMO’s platform
could be adversely affected and revenue growth may slow, which could negatively impact ELMO’s
operating and financial performance.
ELMO has experienced a period of considerable growth in both revenue, employee numbers and
customer base. Based on ELMO’s projections, ELMO expects further growth in the future which could
place significant strain on the current management, operational and finance resources as well as the
infrastructure supporting ELMO’s platform. Failure to appropriately manage growth could result in failure
to retain existing customers and a failure to attract new customers which could adversely affect ELMO’s
operating and financial performance.
Future expansion by acquisition may be affected by factors beyond ELMO’s control (including without
limitation, commercial or regulatory changes). There is a risk that the integration requires significantly more
financial and management resources, or time to complete, than originally planned. Acquisitions may fail to
meet ELMO’s strategic and financial objectives, generate the synergies and benefits that ELMO expected,
or provide an adequate return on the purchase price and resources invested in them. There is a risk that
in any acquisition appropriate warranties or indemnities cannot be obtained or that ELMO’s due diligence
and analysis may be incomplete or inaccurate. Any of these factors, either individually or in combination,
may have an adverse impact on ELMO’s operating and financial performance.
104
ELMO ANNUAL REPORT 2019 Failure to realise
benefits from
product research and
development
Developing software and technology is expensive and often involves an extended period of time to
achieve a return on investment. ELMO believes that it must continue to dedicate resources to ELMO’s
innovation efforts to develop ELMO’s software and technology product offering and maintain the
Company’s competitive position.
ELMO may not however, receive benefits from these investments for several years or may not receive
benefits from these investments at all. There is a risk that ELMO may fail to realise benefits from its
innovation and product development related costs
Disruption or failure
of technology and
software systems
ELMO and its customers are dependent on the performance, reliability and availability of ELMO’s platform,
data centres and communications systems (including servers, the internet, hosting services and the cloud
environment in which ELMO provides its solutions).
Loss or theft of data
and failure of data
security systems
Any disruption or failure of ELMO’s technology and software systems could potentially lead to a loss
of customers, legal claims by customers, and an inability to attract new customers, any of which could
adversely impact ELMO’s operating and financial performance.
ELMO’s products involve the storage of customers’ confidential and proprietary information including
information regarding their employees. ELMO’s business could be materially impacted by security
breaches of customer data either by unauthorised access, theft, destruction, loss of information or
misappropriation or release of confidential customer data. There is a risk that any measures taken may not
be sufficient to prevent or detect unauthorised access to, or disclosure of, such confidential or proprietary
information, and any of these events may cause significant disruption to ELMO’s business and operations.
This may also expose ELMO to reputational damage, regulatory scrutiny and fines, any of which could
materially impact ELMO’s operating and financial performance.
Success of sales and
marketing strategy
ELMO’s future success is partly dependent on the realisation of benefits from investment spent on sales
and marketing campaigns and initiatives. Failure to realise intended benefits from sales and marketing
investment could negatively impact ELMO’s ability to attract new customers and adversely impact ELMO’s
operating and financial performance.
Revenue recognised
throughout term of
customer contracts
ELMO invoices customers annually in advance and recognises revenue monthly on a pro-rated basis
throughout the term of the contract. As a result, most of the revenue realised in any given period relates
to agreements entered into during previous periods. Consequently, a shortfall in demand for ELMO’s
solutions or losses in the existing customer base may not be reflected in the revenue results of that period
but are likely to negatively impact revenue in subsequent periods. Accordingly, the effect of a shortfall in
revenue from ELMO’s platform may not be fully reflected in the financial performance until future periods.
Competition
Funding
The HR & Payroll software industry is rapidly evolving and becoming increasingly competitive. Some of
ELMO’s existing and potential competitors have significantly more resources than ELMO does. Due to
competitive factors, ELMO may compete less effectively which may reduce the Company’s market share
and ability to develop or secure new business. This would have an adverse impact on ELMO’s operating
and financial performance.
ELMO may in the future require further funding with respect to its business, for either ongoing operations
or to fund acquisitions. This funding may take the form of debt financing or raising more capital from
existing shareholders or new investors. There is no guarantee that any such funding will be available,
or available on terms that are acceptable to ELMO. Any capital raising may dilute existing shareholders
equity.
105
ELMO ANNUAL REPORT 2019 Glossary
Term
ARR
AASB
ASX
Meaning
Annual recurring revenue
Australian Accounting Standards Board
Australian Securities Exchange
Australian Accounting
Standards
Australian Accounting Standards and other authoritative pronouncements issued by the Australian
Accounting Standards Board and Urgent Issues Group interpretations
Australian Accounting
Standards Board
The AASB is an Australian Government agency under the Australian Securities and Investments
Commission Act 2001
Board
CEO
CFO
The board of directors of the Company
Chief Executive Officer
Chief Financial Officer
Company
ELMO Software Limited
Corporations Act
Corporations Act 2001
Customer retention in
dollar terms
Customer retention in dollar terms measures the ratio of like for like revenue growth of customers who
transacted in the current and the preceding year
Customer retention rate
Customer retention is calculated by dividing the number of customers in the reference period
who were customers at the end of the prior period by the number of customers at the end of the
prior period
Directors
EBITDA
ELMO
The directors of the Company from time to time
Earnings before interest, income tax, depreciation and amortisation
ELMO Software Limited
Free cash flows
EBITDA after the removal of non-cash items in EBITDA such as bad debts and changes in working
capital less capitalised software development and commission costs and other capital expenditure
FY
IPO
KMP
Financial year ending
Initial Public Offering
Directors and key management personnel
Prospectus
The prospectus dated 6 June 2017 issued as part of the IPO
Recurring revenue
Recurring revenue is the portion of a company’s revenue that is highly likely to continue in the future
SaaS
Share
Software-as-a-Service
A fully paid ordinary share in the Company
106
ELMO ANNUAL REPORT 2019 Corporate Directory
Directors
Barry Lewin
Danny Lessem
Leah Graeve
Catherine Hill
Company secretary
Anna Sandham
Registered office
Level 12
680 George Street
Sydney NSW 2000
Phone: 02 8280 7100
Principal place of business
Level 27
580 George Street
Sydney NSW 2000
Phone: 02 8305 4600
Share register
Link Market Services Pty Limited
Level 12
680 George Street
Sydney NSW 2000
Phone: 02 8280 7100
Auditor
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Solicitors
Mills Oakley
Level 12
400 George Street
Sydney NSW 2000
Financial adviser
Blackpeak Capital Pty Ltd
Level 5
55 Harrington Street
The Rocks NSW 2000
Stock exchange listing
ELMO Software Limited shares are listed on the Australian
Securities Exchange (ASX code: ELO)
Website
www.elmosoftware.com.au
Corporate governance statement
https://investors.elmosoftware.com.au/
Investors/?page=Corporate-Governance
ELMO ANNUAL REPORT 2019 ELMO Software Limited
ACN 102 455 087