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Australian Financial Review: Aussie HR tech firm ELMO Talent Management seeks $40m ASX listing

Australian human resources software company ELMO is eyeing a $40 million float on the Australian Securities Exchange, 15 years after it started its growth in a dimly lit bunker.

When Danny Lessem founded the cloud-based software company in 2002 with co-founder Manuel Garber, ELMO was an e-learning platform and the term “cloud” had yet to enter everyday vernacular.

Lessem, Garber and one other employee worked out of a subterranean office in Sydney’s Milsons Point with patchy phone reception, limited sunlight and occasional flooding.

Fifteen years later, ELMO is headquartered in a high-rise building in Bondi Junction with more than 100 employees and 500 clients, most of whom are mid-tier businesses in the ANZ region.

Lessem declined to disclose its revenue, but as of October last year the company had a revenue forecast of $18 million for the 2017 financial year and has been growing at 40 per cent for the past three years. Co-founder Garber, 75, is busy tango dancing but is still involved in the business in an advisory capacity.

As foreshadowed by Street Talk last November, ELMO has appointed Wilsons to float the company on the ASX this year with aim to raise $40 million.

Speaking to The Australian Financial Review, ELMO chief executive and co-founder Danny Lessem says ELMO has plenty of room for growth in the ANZ region because it only has a 3 per cent market share.

“We’re profitable already. I’m not going to name names, but we’re not going to the market burning the cash,” he says.

“We’re not saying we’re the next Atlassian. What we’re saying is we have a great product which resonates in ANZ, there is a lot of addressable market, there is a lot of space for growth to sustain growth in the next two years and we’ve got a great M&A strategy,” he said.

Lessem says ELMO is different from a string of recent tech floats, which he says emerged from companies without a proven track record.

“Some just have a business plan and they use the ASX as a venture capital supplier. They have no proven record, no balance sheet, no historical financials,” he says.

“We’ve been self-sufficient for 15 years, we’ve got a client base, we’re cash flow positive and EBITDA positive.”

ELMO is aiming to raise $40 million and use it to accelerate the launch of related HR products which deal with timesheet, attendance at work, rostering and remuneration.

Currently the ELMO software covers e-learning, performance management, recruitment, induction, succession planning and leave management. It intends to acquire specialist HR software providers and bring products together on its own platform.

Last year, ELMO acquired e-learning provider Techniworks and will be looking for similar acquisition opportunities.

Lessem says while ELMO has plans to expand to the US and UK in the next couple of years, in the next 24 months the company will be focusing on the “low-hanging fruits” in the ANZ region.

He says and IPO will help spread ownership among employees and long-term customers.

Unusually for a technology company, ELMO does not have offshore support staff, something Lessem says appeals to medium-sized organisations which want a local solution to technological problems.

“Offshoring might make sense if you’re a Fortune 500 company but when you’re an Australian organisation and you want your system configured and supported, you want to have it done in Australia,” he says.