For personal use only - ASX2017/10/18 · FY17 pro forma EBITDA Up 42% on prospectus forecast1 524 Customer base3 Up 11% since 31 December 2016 2.29 Modules per customer Up from 2.22

1

ELMO Soft ware LimitedACN 102 455 087

ANNUAL REPORT 2017

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ELMO Software L imited | Annual Report 2017ELMO Software L imited | Annual Report 2017

2017 Highlights

$19.1mSaaS revenue run rate

Reflecting89%offorecastFY18proformaSaaSrevenue2

$17.0mFY17 pro forma revenue

Up4%onprospectusforecast1

92.3%Customer retenti on rate5

1. Vs.proformaFY17forecastasperIPOProspectusonalike-for-likebasis2. June2017SaaSrevenueannualised3. Asat30June20174. ExcludesTechniWorks5. Customerretentioniscalculatedbydividingthenumberofcustomersinthereferenceperiodwho

werecustomersattheendofthepriorperiodbythenumberofcustomersattheendofthepriorperiod

$1.2mFY17 pro forma EBITDA

Up42%onprospectusforecast1

524Customer base3

Up11%since31December2016

2.29Modules per customer

Upfrom2.22sinceJune3020164

Over 37,000Hours

FocusedonResearch&Development

<2.9%of FY17 revenue (SaaS)

Contributedbylargestcustomer

<16%of FY17 revenue (SaaS)

Contributedbytop10customers

ContentsIFC 2017 Highlights

02 Financial snapshot

04 Chairman’s lett er

06 CEO’s message

08 Company history

10 Product and soluti on

11 Soluti on off ering details

13 Industry partnerships

14 ELMO growth strategy

17 Business model

20 Operati ng and fi nancial review

22 Risk management

24 Environment, social and governance

26 Board of Directors

28 Key Management Team

30 Directors’ report

41 Auditor’s independence declarati on

42 Financial report

46 Notes to the fi nancial statements

69 Independent auditor’s report

78 GlossaryIBC Corporate directory

AGM DetailsELMO Soft ware Limited (ELMO) advises that it will hold its 2017 Annual General Meeti ng onTuesday, 28 November 2017 at 2.30pm (Australian Eastern Daylight Time) at the offi ces of Norton Rose Fulbright, Level 18, Grosvenor Place, 225 George Street, Sydney.

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ELMO operates in the Human Capital Management (HCM) soft ware market. HCM soft ware soluti ons are used to support and automate HR related processes at various stages of an employee’s lifecycle, including recruitment, onboarding, performance management, learning and development, succession planning and employee administrati on.

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ELMO Software L imited | Annual Report 20172

Financial snapshot

PRO FORMA HISTORICAL AND FORECAST REVENUE ($M)

PRO FORMA EBITDA VS. OPERATING CASH FLOW ($M)

ELMO has achieved a successful FY17 with 31% SaaS revenue growth (excluding Techni Works) from the previous year culminati ng in the capital raising through the IPO in June 2017. There is strong revenue visibility with long term contracts paid annually in advance, a signifi cant cash positi on from the IPO, high operati ng cash fl ow and a strong ongoing positi ve working capital positi on.

Strong revenue visibility with 93% recurring revenue and typical contract length of 3 years

Positi ve working capital Customers pay annual license fees in advance – contributi ng to positi ve working capital positi on throughout the year

Strong balance sheet and no debt $26.6mStrong cash positi on as at 30 June 2017

FY18FFY17FY16FY15FY14

3.1

0.91.2

2.42.0

2.7

EBITDA Operating Cash Flow6.1

1.1

2.3

253%

Operating cash flow conversion2

195% 227%165%218%

1.6

FY18FFY17FY16FY15FY14

12.6

7.1

7.3

13.5

22.4

0.2

0.921.5

0.9

SaaS revenue Other revenue

15.7

17.01.2

9.0

9.9

97%Recurring revenue

SaaS revenue growth

93% 96%93%90%

50% 40%31%37%

1.0

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2017 Scorecard

New product off erings

HR Core & Succession modules

Technology enhancements

128 productenhancements

Acquisiti on

Techni Works

New Zealand

Established New Zealand offi ceto support operati ons

Workforce

106 employeess

Listed on the ASXon 27 June 2017

Raised $25m in new equiti y

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Chairman’s lett er

Dear Shareholder,

OnbehalfoftheDirectors,itismypleasuretopresenttoshareholdersELMO’smaidenFY17fullyearresultsandAnnualReportasapubliclistedcompany.

ELMOisaleadingproviderofSoftware-as-a-Service(SaaS),cloud-basedtalentmanagementsoftwaresolutionsinAustraliaandNewZealand.TheCompanydevelops,sellsandimplementstalentmanagementsoftwaresolutionsthatenableorganisationstoautomatemanyoftheHumanManagementCapital(HCM)processesandfunctionstoefficientlymanagethevariousstagesofanemployee’slifecyclefrom“hiretoretire”.ELMOcurrentlyofferssevendifferentmodulescoveringrecruitment,onboarding,performancemanagement,learninganddevelopment,pre-builtcourses,successionplanningandemployeeadministration.

FY17wasatransformativeyearforELMO.InJune2017welistedontheASXandsteppedintopubliccompanylife.Ourfirstresultdeliveredonourprospectusforecastsandinthetimeleadinguptothefloat,andintheperiodsincewehaveputinplacestrongfoundationsforfuturegrowth.Thehighlightsinclude:

– SuccessfullistingonASX,raising$25mofnewequitytofundourgrowthplans

– ReportedproformaEBITDAof$1.2m,42%aheadofprospectusforecast

– GrewproformaSaaSbasedsubscriptionrevenuesby26%yearonyear,4%aheadofprospectusforecasts

– Increasedourcustomerbaseto524organisations,up46%since30June2016

– LaunchednewproductofferingsincludingHRCoreandSuccession

– Improvedtheaveragemodulepurchasedpercustomerto2.29,upfrom2.22since30June2016

DuringthefinancialyearELMOacquiredandintegratedTechniWorksPtyLimitedintoitsbusiness,acquiring82newcustomers,takingELMO‘stotalcustomerbaseto524organisations.Inaddition,ELMOeffectivelydeliveredtheidentifiedacquisitionsynergiesthroughoperationalefficienciesandcrosssellingintotheacquiredcustomerbase.

NewZealandcontinuedtomakeapositivecontributiontotheGroupwiththeCompany’sNewZealandcustomerbaseincreasing41%since31Dec2016whilerevenuesincreasedby264%comparedtothefullyear2016.

OutlookThemid-marketcontinuesitstrendtowardsHRautomationwiththemajorityofmid-marketbusinessesnotyettakingadvantageofasingleintegratedplatformsolutionwhichgivesrisetonewcustomeropportunitiesforELMO.TheHCMmarketisfragmentedwithmanysinglesolutionvendorswithinherentcompetitivedisadvantagesascustomerstrendtowardsasingleintegratedplatformsuchasELMO.ThisprovidestheopportunityforyourCompanytogainfurthermarketsharethroughbothorganicandinorganicgrowth.Inparticular,theCompanyhasamulti-pillargrowthstrategybasedon:

– theupselloffurthermodulestoexistingcustomers

– ongoinggrowthinnewcustomers

– newproductdevelopmenttoexpandtheexistingplatform

– additionalbolt-onacquisitions

– geographicexpansion

Eachofthesepillarshasitsownexecutionstrategyandtheboardandmanagementaremonitoringcloselythevalueoftheopportunitythatarisesineacharea.

WearepleasedtoreaffirmourFY18prospectusforecasts.BasedontherunrateofrecurringSaaSrevenueinJune2017wehavealreadyachieved89%offorecastrevenueforFY18.

ThanksELMOisledbyahighlyregardedandexperiencedmanagementteamthathasatrackrecordofachievingsignificantrevenuegrowthanddeliveringontargets.IwouldliketothankDannyLessem,Co-FounderandCEOforhistalentedanddedicatedleadership,TreverLonstein,CFOandexecutivedirector;andmyfellowNon-ExecutiveboardmemberDavidHancockforhisexpertise,skillandsupport.

IwouldalsoliketothankallofthepeopleatELMOfortheirdedicatedeffortsindeliveringtheseresults.Iknowyouareextremelycapableanddeeplycommittedtodeliveringthebestoutcomesforcustomers.

OnbehalfoftheBoard,IthankyouforyoursupportasashareholderandlookforwardtosharingthefutureCompanysuccesswithyou.

Yourssincerely,

Jim McKerlieChairman

“FY17wasastrongandproductiveyearforELMO.Wedeliveredonourprospectusforecastsandexecutedonourgrowthstrategies.“

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FY17 was a transformative year for ELMO. In June 2017 we listed on the ASX and stepped into public company life. Our first result delivered on our prospectus forecasts and in the time leading up to the float, and in the period since we have put in place strong foundations for future growth.

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CEO’s message

Dear Shareholder,

InFY17ELMOcontinuedtomakegoodprogressinexecutingonitsgrowthstrategies,listedontheASXanddeliveredonmarketexpectations.Wearebuildingalarger,strongerandmorediversifiedELMOandwelookforwardtoanotheryearofsignificantrevenueandprofitgrowthinFY18aswedeliveronprospectusforecasts.

InFY17,ELMOdelivered

– $17.0millionofproformarevenueswithSaaSrevenuegrowthof31%,excludingTechniWorks

– 93%recurringrevenueanda92%customerretentionrate

– $1.2mproformaEBITDAwhileincreasinginvestmentby32%todrivefurthergrowth

– SuccessfulintegrationandachievementofthefullsynergiesoftheTechniWorksacquisition

– Proformacashreceiptsofover112%ofproformarevenues

– ListedonASXon27June2017,withanissuepriceat$2.00pershare

ELMOwasfoundedin2002asaneLearningplatformfocusedonprovidingemployeedevelopmentcontentandcompliance.Sincethen,drivenbyclientdemand,ELMOhasexpandeditsplatformtoaddresstheevolvingrequirementsoftheHumanCapitalManagement(HCM)industrybyofferingabroadersuiteofmodularapplicationstocoverawiderrangeoftalentmanagementneeds.ResearchanddevelopmentisatELMO’scorewithcontinualinvestmentinthedevelopmentofnewHCMmodulesandtheenhancementofitsexistingplatform.

Leading integrated talent management platf ormELMOisaleadingproviderofintegratedtalentmanagementsoftware.Wenowemploy106peoplein4officesacrossAustraliaandNewZealand.ELMO’sSaaScloudbasedplatformprovidesorganisationswithacentralisedapproachtomanaginganemployee’slifecycle.

WehaveinvestedinanddevelopedascalableSaaScloudbasedplatformwithmulti-tenantarchitectureandsinglesourcecode.Ourplatformtechnology,softwaresolutionsandlearningcontentaredevelopedandmaintainedin-housebyELMO’sAustralianbasedteam.Developedoverfifteenyears,wehaveover400eLearningcoursesinourcontentlibrarycoveringabroadrangeoftopics.

Ourprimarycustomertargetsaremid-marketorganisationswithbetween100–1000employeeswhereweseesignificantopportunitiesforincreasedmarketsharegrowth.

Large market with clear growth strategiesWehavealargeaddressablemarketwithcleargrowthstrategiestodeliverongoingvalueforshareholders.

TheglobaltalentmanagementtotalavailablemarketisestimatedataroundUS$6.1bnpawiththeAustralianandNewZealandmarketataroundUS$258mpa.Weseetheacceleratingpenetrationofcloudbasedtalentmanagementsolutionsandtheirincreasingadoptioninthemid-market.

ELMOhasabroadanddiversecustomerbasewithscopeforongoingorganicgrowth.Wehave524activecustomersacrossmultipleindustriesandsectors.Ourcustomerbasehasgrownby47%CAGRsinceFY14.Ourlargestcustomeraccountsforlessthan2.9%oftotalrevenue.Ourtop10customersaccountforlessthan16%oftotalrevenue.Customercontractsaretypicallyforthreeyearswithsubscriptionspaidannuallyinadvance.

ELMOhasclearstrategiestodeliverongoinggrowthandvalueforshareholders

ELMO has multi ple growth drivers1. Greater usage from existi ng customers–

growingpenetrationamongsttheexistingcustomerbasewithaveragemodulespercustomerof2.29,upfrom2.22asatJune30th2016

2. New customers in existi ng markets–166newcustomerswereaddedinFY17includingTechniWorks.Thereisasignificantopportunitytofurtherpenetrateexistingmarketsandincreaseoverallmarketsharefromthecurrentlevelof4%

3. Expand product line–SuccessionandHRCoremoduleswerelaunchedinFY17.Continuousdevelopmentanddeploymentofnewfeatureswith128enhancementslaunchedinFY17.Fourmodulesareslatedtobereleasedinthenexttwotothreeyears

4. Growth through acquisiti ons–HavingfullyintegratedTechniWorksweareactivelyseekingboltonacquisitionsorcomplimentarytechnologytoaugmentELMO’svalueproposition

5. Geographic expansion –NZcustomerbaseof31,up41%since31December2016,264%increaseinrevenuefromFY16.

OutlookGivenourpositivemomentumwehaveaconfidentoutlookforFY18.WeaffirmourFY18prospectusforecastsincluding:

– ProformaSaaSrevenueof$21.5m(+39%SaaSrevenuegrowthexTechniWorks)

– ProformaEBITDAof$2.68m(12%marginversus5.26%inFY17)

– ProfitbeforeTaxof$319,000comparedtoalossbeforetaxof$1,725,000inFY17

– $25.8mofcashreceiptsdemonstratingourstrongcashconversion

– 96%recurringrevenuereflectingthequalityofourincomestreams

– 650customers(comparedto524atendofFY17)and2.55modulespercustomer(2.29atendFY17)

TheJune2017revenuerunraterepresents$19.1millionofSaaSrevenue,reflecting89%offorecastFY18proformaSaaSrevenue.

AcknowledgementsIndeliveringonthesegrowthstrategiesImustthankalltheELMOstaffwhohaveworkedsodiligentlyinbuildingthisspecialbusiness.WeareproudofELMO’scultureofinnovationanddeliveringexceptionalservicetoourcustomers.Welookforwardtomakingfurtherprogressintheyearaheadandthankyouonceagainforyoursupportasashareholder.

Yourssincerely,

Danny LessemCo-FounderandCEO

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$17.0mof pro forma revenues

31%SaaS revenue growth ex Techni Works

524Customers

We are building a larger, stronger and more diversifi ed ELMO and we look forward to another year of signifi cant revenue and profi t growth in FY18 as we deliver on prospectus forecasts.

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Company history

ELMO was founded in 2002 by Danny Lessem, the Company’s CEO, and Manuel Garber, a conti nued Shareholder, for the purpose of providing an eLearning platf orm with customised content for compliance and training. Since incepti on, ELMO’s soluti ons have been built and developed using a SaaS, cloud-based infrastructure. Duringtheinitialphasefollowinglaunch,ELMObegantobuildaneLearningcourselibrarythattheCompanycontinuestogrow,developandinvestintodaywithadditionaleLearningcontentaspartofitsPre-BuiltCoursesmodule.Thismodulecurrentlyprovidescustomerswithover400differenteLearningcourses,includingcomplianceandpolicy,organisationalprocess,systems,professionaldevelopmentandsoftskills.

In2007,ELMO’stalentmanagementsoftwaresolutionsreceiveditsfirstAustralianGovernmentsupplierpanelarrangementwiththeQueenslandGovernment.In2011,afterreceivingfeedbackfromcustomers,ELMObegantoexpanditsplatformwiththeobjectiveofofferingafullsuiteoftalentmanagementsoftwaresolutionstoservicethechanging

requirementsoftheHRfunction.ThistransitionbeganwiththelaunchoftheCourseBuilderandLearningManagementSystem(LMS)modules.

In2013,ELMO’scustomerbasereachedover130organisations.Duringthatyear,ELMOalsobeganshiftingtheCompany’sfocustowardsaddressingtheHCMrequirementsofmid-marketorganisations,whichELMOviewedasanunderservicedmarketthatpresentedattractivemarketopportunities.

In2013,ELMOcontinuedtoexpanditssolutionsofferingwiththeintroductionofitsPerformancemodule.Inaddition,theCompanyreceivedseveralgovernmentaccreditationsandintroducedtheAustralianHumanResourcesInstitute(AHRI),thenationalassociationrepresentinghumanresourceandpeoplemanagementprofessionals,asacustomer.

In2015,ELMOexpandedintoNewZealandandSingapore,anditscustomerbasegrewtoover250organisations,includingtheHumanResourcesInstituteofNewZealand(HRINZ). Additionally,followingELMO’songoingcommitmenttoinvestinginresearchanddevelopmenttoexpanditsproductsuite,theCompanylauncheditsOnboardingandRecruitmentmodules.

In2016,theCompanycontinuedtoexpanditssolutionsofferingwiththelaunchofitsSuccessionmoduleandhadgrownitscustomerbasetoover350organisations.InOctober2016,ELMOcompleteditsfirstacquisition,beingTechniWorks,anAustralianeLearningcompanyspecialisingintheprovisionofAustralianfocusedeLearningcourses.TheacquisitionofTechniWorksexpandedELMO’scourselibraryandadded82neworganisationstotheCompany’sexistingcustomerbase,whichincludedtertiaryeducationinstitutionsandgovernmentorganisationsattheCommonwealth,StateandLocallevels.

In2017,ELMOformallylauncheditsfirstHRAdministrationproductwiththereleaseofitsHRCoremodule.

Today,ELMOcontinuestofocusonplatformexpansionwithcontinuousproductdevelopmentandenhancement,andiscurrentlyintheprocessofdevelopingadditionalHCMmodules.Asat30June2017,theCompany’ssolutionswerebeingusedby524organisations.AsummaryofELMO’shistoryisprovidedbelow.

2002 2011 2012 2013 2014 2015 2016 2017

eLearning

customised content

Commenced Commenced Commenced devvvelopment

of full suiof full suiof full suite of talent

manamanamanagement

Focused on ocused on mid-markettt

TechniTechniT wwworks

ELMO founded ounded ounded in 2002 by Danny Lessem y Lessem y Lessem and Manuel Garberand Manuel Garberand Manuel Garber

Approved supplier ed supplier ed supplier on Governmennt Panel arrangemeemeements

SUCCESSIONRECRUITMENT HR CORE

COURSE BUILDER

LEARNING MANAGEMENT SYSTEM

Began expansion xpansion xpansion into New Zealandealandealand

Focus on cuocus on cuocus on customerorientated ted ted training

164 Customers 358 Customers 524 Customers

As at 30 june 2017

254 Customers

PRE-BUILT COURSES

12 3

HEALTH

46%41%55%

AustralianHuman Resources

ces

NNew Zealand

PERFORMANCE

Prod

uct

Cust

omer

s/pa

rtne

rshi

ps

ONBOARDING

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Today, ELMO continues to focus on platform expansion with continuous product development and enhancement.

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Product and soluti on

Leading integrated talent management platf orm

END TO END ‘HIRE TO RETIRE’ SOLUTION

RECRUITMENTJob requisition

Talent poolJob posting

Branded careers webpage

ONBOARDINGPersonalised onboarding webpageWorkflows and approvalsElectronic forms

SUCCESSIONEnsure business continuity

Employee career progressionFoster strategic succession

HR CORELeave managementOrganisation charts

Employee self-service Manager self-service

PERFORMANCEPerformance appraisalsManagement team viewConfigurable reports

PRE-BUILT COURSESBest practice eLearning content

Course editorCourse features

Assessment features

COURSE BUILDERCreate coursesCreate assessmentsCreate surveys Preview and Publish

LEARNINGLearner’s viewCourse catalogueManager team viewConfigurable reports

12 3

HEALTH

ELMO provides a talent management soft ware soluti ons platf orm that aims to address and automate key HCM acti viti es and processes. The platf orm currently off ers seven talent management soft ware modules that address various stages of an employee’s lifecycle from hire to reti re. Customers can purchase modules based on their immediate needs with scope to add additi onal modules at any point. The fi gure below provides a summary of the key functi onaliti es of the individual modules. Customers who are subscribed to the Learning module are also provided with the Course Builder module as part of the off ering.

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HR CORE RECRUITMENT ONBOARDING PERFORMANCE

– Leave management–Leaverequisitionandauthorisationworkflows

– Organisati on charts–Overviewoforganisation’sstructureandreportingrelationships

– Employee self-service–Enablesemployeestoaccessandupdatepersonalinformation,requestleaveandaccesspayrollslipsfromanydevice,anywhereandatanytime

– Manager self-service–Enablesmanagerstoaccessemployeeinformation,approveleaverequestsandviewteamanalyticsfromanydevice,anywhereandatanytime

– Job requisiti on–Selecttherequiredjobposition,addspecificrequirements,alertrecruitmentmanager,trackandmonitorprogress,andcustomiseapprovalworkflows

– Talent pool–Searchexistingemployees,searchthecandidatedatabase,matchjobcriteria,andrankcandidates

– Job posti ng –Integratewithjobboardsandsocialmedia,presetpostingrules,andtrackcosts

– Branded careers webpage–Embedcustomerorganisation’swebsite,customisebranding,incorporatecompanymedia,andpostjobsautomatically

– Personalised onboarding webpage–Presentcompanyinformationandvideo,guidelinesforonboardingprocess,onboardingtasklist,andteammemberintroductions

– Workfl ows and approvals–Configureprocessandselectstakeholders,prerequisites,timedelays,andconditions

– Electronic forms –Configurableforms,documentuploadfacility,andintegrationwithATOandother3rdparties

– Performance appraisals –Configuretocustomer’srequirements,featuresgoalsetting,competencymodels,developmentplansand360reviews

– Manager team view–Accessdirectandindirectreports,viewcurrentstatusofappraisals,searchfacility,exportandprint

– Succession planning–Identifyhighperformers,mitigateflightrisk,recruitfromwithin,fosterstrategicsuccession

– Confi gurable reports–Generateattheclickofabutton,choosefieldsforcomparison,colouredgraphsforvisualdisplay,exporttoExceland/orPDF,andemailreports

SUCCESSION LEARNING COURSE BUILDER PRE-BUILT COURSIIES

HEALTH

12 3

– Ensure business conti nuity–Determinerolecriticality,identifyhighperformersandmitigateflightrisk

– Employee career progression–Viewsuccessionpathways,identifyskillsgapsandcreatedevelopmentplans

– Foster strategic succession–Matchhighpotentialemployeestocriticalrolesandcomparecandidatesuitabilitybyskills,performance,potentialandaspirations

– Learner’s view–Personalisedlearningplan,eLearningcourses,instructor-ledtraining(ILT),policyacknowledgements,assessmentsandsurveys

– Course catalogue–Courseself-selection,searchfacility,configurableenrolmentrules,accesstoover400pre-builteLearningcourses

– Manager team view–Accessdirectandindirectreports,viewcurrentstatusoflearning,searchfacility,exportandprint

– Confi gurable reports–Generateattheclickofabutton,choosefilesforcomparison,usecolouredgraphsforvisualdisplay,exporttoExceland/orPDF,automatereportemails

– Create courses–Insertimages/movies,edittext,recordvoice-over,anduseinteractivefeatures(buttons,rollovers,hotspots,etc.)

– Create assessments –Selectquestiontype(multi-choice,T/F,draganddrop),insertimages/voice-over,randomisequestions,andsetpassmark

– Create surveys–Selectquestiontype(multiplechoiceorfreetext),compulsoryandanonymousoptionality

– Preview and publish–Customerbranding,updatecustomerinreal-time,publishELMOorSCORMcompliantLMS

– Best practi ce eLearning content –Compliancesourcesupdates,qualityassurance,expertinstructionaldesign

– Course editor –AccessibleviatheInternet,noprogrammingskillsrequired,accesstoELMOroyaltyfreeimagelibrary,uploadyourownmultimedia

– Course features–Customerbranding,multimediaenabled,touchscreenoptimised,modifycontentwiththeELMOcourseeditor

– Assessment features–Automaticmarking,multimediaenabled,touchscreenoptimised,modifyQ&AswithELMOcourseeditor

Soluti on off ering detailsF

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ELMO has forged deep and exclusive relati onship with the industry peak bodies in Australia and New Zealand. This enhances the ability to ELMO to access potenti al customers , increases industry recogniti on and enables ELMO to work closely with industry stakeholders to enhance current soluti ons and develop new soluti ons to meet their evolving needs.

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Industry partnerships

ELMO has forged deep and exclusive relati onship with the industry peak bodies in Australia and New Zealand. This enhances the ability of ELMO to access potenti al customers, increases industry recogniti on and enables ELMO to work closely with industry stakeholders to enhance current soluti ons and develop new soluti ons to meet their evolving needs.

ELMO has worked in partnership with AHRI, Australia’s peak HR industry associati on, since 2013. This relati onship provides ELMO with unprecedented exposure to AHRI’s 20,000+ HR industry members through a series of nati onal networking forums, conferences, the annual HR Awards and the fl agship AHRI Nati onal Conventi on and Exhibiti on. AHRI also provide members with access to ELMO’s pre-built content library via their online portal and recently, has launched a HR Certi fi cati on program designed to advance the HR profession within Australia.

ELMO has worked in partnership with HRINZ, New Zealand’s peak HR industry associati on since 2015. 45% of the New Zealand HR Industry (just over 3000 individuals) are current HRINZ members and through this membership, can access educati on and informati on services, conferences and seminars and parti cipate in the annual NZ HR Awards. ELMO’s sponsorship of key events, and the provision of the ELMO soluti on via the HRINZ online portal off ers exposure and brand awareness for our growing list of New Zealand clients.

RCSA is the peak associati on for the Australian and New Zealand recruitment industry with over 3000 corporate and individual members. Members can access educati on, research and business advisory support. ELMO has been in partnership with the RCSA since 2015, ELMO’s sponsorship of key events and the provision of ELMO technology and content via the RCSA online portal off ers exposure and brand awareness to potenti al clients working in the recruitment industry.

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ELMO growth strategy

ELMO’s growth strategy is based on fi ve key levers:

Greater usage fromexisti ng customers

ELMOhasastrongcustomerretentionrateof92.3%andaimstoincreaseusageofitssolutionsamongsttheCompany’sexistingcustomerbaseandundertakecross-sellingandupsellingofadditionalmodulestocustomerswhoarenotyetsubscribedtothefullsuiteofELMO’smodules.Currently,ELMOofferscustomersseventalentmanagementmodulesofwhich,onaverage,customersaresubscribedto2.29modules(upfrom2.22asatJune2016).ELMOplanstosupportthisgrowthstrategybyundertakingfurtherinvestmentinitssalesandmarketingteamandbroadeningitstalentmanagementsoftwaresolutionsofferinginordertoimprovetheinherentvalueoftheplatformtotheexistingcustomerbase.

+

New customersin existi ng markets

Thereisasignificantopportunitytofurtherpenetrateexistingmarketswithcontinuationofstrongsalesmomentum.Additionalpotentialmaybecapitaliseduponthroughanincreasingnumberofmidmarketfirmsadoptingcloud-basedtalentmanagementsoftware.Theresultofthisincreasedpenetrationintoexistingmarketisthat:

– Thereare166newcustomers,includingTechniWorkscustomers,acquiredduringFY17

– Atotalcustomerbase,includingTechniWorks,of524asat30June2017.

Expandproduct line

ELMOadoptsacontinuousimprovementapproachtoitsSaaS,cloud-basedofferingbycontinuouslyinvestinginresearchanddevelopmentwithanexpenditureof15%ofFY17revenuetoexpanditsproductofferingwithnewadditionalmodulesaswellastoenhancethefunctionalityofitsexistingplatform.ThesignificantinvestmentinresearchanddevelopmentisakeypillarofELMO’sstrategywith24%ofstafffocusedinthisarea.ForFY17thisresultedinover37,000manhoursspentonR&Dand$2.5mtotalcashflowcosts.AsELMOreleasesnewproductsandplatformenhancements,theCompanyexpandsitsopportunitiestofurtherentrenchtheexistingcustomerbasethroughcross-sellandupsellinitiativesandsupportnewcustomeracquisition.TheSaaS,cloud-basedinfrastructureofELMO’splatformishighlyconducivetotheseopportunitiesandallowsfornewproductmodulestobeeasilysoldandimplementedwithbothnewandexistingcustomers.

TheproductdevelopmentprocessisdrivenbycollatingfeedbackandproductenhancementsuggestionsfromawiderangeofsourcesincludingELMO’sbroadcustomerbaseandemployees.Thereiscontinuousdevelopmentanddeploymentofnewfeaturesonexistingmoduleswith128enhancementsinFY17.

ELMOhasrecentlylaunchedamoduleforHRadministrationfunctions(HRCore)toexpanditsmarketopportunityandaddressbothcategoriesoftheHCMindustry.AdditionalmodulesinELMO’sdevelopmentpipelineincludesRewardsandRecognition,TimeandAttendance,RemunerationandWorkforcePlanning.ELMOaimstolaunchfournewmodulesinthenexttwotothreeyears.

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Growth through acquisiti onsTheHCMindustryisahighlyfragmentedmarketwithmanysmallvendorsofHCMsolutions.Asaresultofbeinginoperationsince2002,ELMOhasincreasinglybecomefamiliarwiththevariousprovidersofHCMsolutionsacrosstheANZmarketandbelievesthatthereisanopportunitytogainadditionalmarketsharethroughtargetedacquisitionsofsmallerHRtechnologycompanieswhoprovidesingleHCMpointsolutionswithintheindustry.SimilartoELMO’srecentacquisitionofTechniWorks,incorporatingcomplementaryHRtechnologybusinessesintoELMO’sbusinessprovidesopportunitytoleverageoperationalefficienciesthroughELMO’sexistinginfrastructureandexplorepotentialupsellandcross-sellopportunities.

Case study: Acquisiti on of Techni WorksAcquisiti on summaryInOctober2016,ELMOcompletedtheacquisitionofTechniWorksforatotalmaximumconsiderationof$2.6million,inclusiveofconditionalearnoutpayments.

Techni WorksTechniWorksisanAustralian-basedonlinelearningsolutionscompanyspecialisingintheprovisionofoff-the-shelfandcustom-builteLearningcoursesdevelopedspecificallyfortheAustralianworkenvironment.Sincebeingestablishedin1999,TechniWorkshaddevelopedaneLearningcoursecontentlibraryandgrowntoacustomerbaseof83organisationswhichoperateacrossalllevelsofgovernment(Commonwealth,StateandLocal)andtertiaryeducationalinstitutions.

Rati onaleThestrategicrationaleunderpinningtheacquisitionofTechniWorksincluded:

– EBITDAmarginexpansionfromsynergycostsavingsasaresultofreductioninoperationalcosts;

– lowintegrationriskandabilitytoextractsignificantoperationalefficienciesfromleveragingELMO’sexistinginfrastructure;

– increasingmarketsharewithanenlargedcustomerbaseof82additionalcustomers.ThisallowsELMOaccountmanagerstoleverageexistingcustomerrelationshipstoestablishnewcontractsfromupsellingandcross-sellingofELMO’sfullsuiteoftalentmanagementsoftwaresolutions;and

– expandingELMO’slearningmoduleplatformwiththeadditionofTechniWorks’46eLearningcourses.

Geographic expansionELMO’splatformhasbeenbuiltanddesignedonagloballyscalableinfrastructureandhasamulti-lingualandmulti-jurisdictionalcompatibleeLearningcourselibrary.AlthoughthereissignificantopportunitytogrowwithinAustralia,ELMOalsobelievesthereiscurrentlyanattractivemarketopportunityforHCMsolutionsinNewZealand.ELMOalsoaimstoeventuallybuilditspresenceoutsideoftheAustralianandNewZealandmarketstoleveragetheCompany’stechnologycapabilityandcapitallightexpansionmodel.

Case study: New Zealand Expansion ELMObeganoperationsinNewZealandduringNovember2014withaninitialcustomerbaseoffiveorganisationsandrevenuesofapproximately$35,000inFY15.Sincethen,ELMO’sNewZealandoperationshaveexpandedtoacustomerbaseof31organisationsacrossthegovernment,finance,retail,agricultural,utilitiesandprofessionalservicesindustrieswhichcontributedrevenueofapproximately$878,000duringFY17.

NEW ZEALAND CUSTOMER BASE GROWTH

30 June 2017 30 June 1630 June 15

31

5

18

NEW ZEALAND REVENUE GROWTH ($000’s)

FY17FY16FY15

878

35

333

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Integrated Human Capital Management (HCM) software providing ‘hire to retire’ software solutions across 7 modules.

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Business model

Integrated Human Capital Management (HCM) software

providing ‘hire to retire’ software solutions across

7 modules

Primarily targets mid-market organisations

(100 – 1,000 employees)

Scalable SaaS, cloud-based platform, multi tenant infrastructure, single

source code

Customer base of 524 organisations and deployed

across 13 different industries1

Platform, technology, software solutions and learning content is developed and maintained

in-house by ELMO’s Australian based team

Over 400 eLearning course content library covering a broad range of topics which has been

developed for over 15 years

ELMO is one of Australia and New Zealand’s leading providers of integrated talent management software solutions

ELMO’s SaaS, cloud-based platform provides organisations with a centralised approach to managing an employee’s lifecycle from ‘hire to retire’

ELMO employs 106 people in 4 offices across Australia and New Zealand

1. Asat30June2017includesconstructionandmining,education,finance,government,healthcareandpharmaceuticals,hospitality,industrials,IT,telecommunicationsandmedia,not-for-profitorganisations,professionalservices,property,retailandtransport.

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Business model

Target mid-market organisationsELMO’stalentmanagementsoftwaresolutionsandbusinessmodelhavebeenprimarilybuilttoaddresstheHCMrequirementsofmid-marketorganisations.Currently,manySaaSHCMprovidersthatofferaunifiedtalentmanagementsolutiontargetlargeenterpriseandgovernmentorganisations(over1,000employees).Thetalentmanagementsolutionsofferedbytheseprovidersaretypicallycostlytoimplement,requiresignificanttimeinvestmentandinvolvecomplexintegrationprocessesmakingsuchsolutionsunsuitedinaddressingtheHCMrequirementsofmid-marketorganisations.Asaresult,mid-marketorganisationshavelimitedHCMsolutionoptionsandmanyexistingsolutionprovidersonlyaddressasingleverticalofthevariousHRfunctions.Asaresult,ELMObelievesthishascreatedalargeunderservicedmarket,whichisgrowingasHRmanagersinmid-marketorganisationsareincreasinglyrecognisingthestrategicimportanceoftalentmanagement.ELMObelievesmid-marketorganisationsrequiremoreflexibleandcosteffectivetalentmanagementsoftwaresolutionsthatcanbedeliveredonshortersalescycles,withsimplerimplementationprocessesthanthosecurrentlyprovidedbyHCMsolutionproviderswhoaretypicallyfocusedonlargerenterprises.

Multi-jurisdictional and industry agnostic ELMO’stalentmanagementsoftwaresolutionshavebeendesignedtobescalableonaninternationalbasiswithitsmulti-jurisdictionalandindustryagnosticplatform.ELMOcurrentlyprovidestalentmanagementsoftwaresolutionstocustomersbasedprincipallyinAustralia,NewZealandandSingapore,however,theplatformcanbetranslatedintonearlyanylanguageandismulti-jurisdictioncompatible.

ELMOcurrentlydeploysitstalentmanagementsoftwaresolutionsacross13differentindustries1:

INDUSTRIES ELMO’S TALENT MANAGEMENT SOFTWARE SOLUTIONS ARE DEPLOYED IN

Construction and mining Hospitality Professional services

Education Industrials Property

Finance Information Technology telecommunications and media Retail

Government Logistics

Healthcare and pharmaceuticals Not for profit

Revenue generationELMOgenerated93%ofitsFY17proformarevenuefromsubscription-basedfeesforitstalentmanagementsoftwaresolutions.Typically,customersenterintothreeyearcontractswithELMOforaccesstoitssolutions.ItiscustomaryforELMOtobepaidannuallyinadvancebythecustomer,withrevenuerecognisedevenlyoverthetwelvemonthsofthecontract.Theamountoftheannualfeeisdependentonthenumberofmodulessubscribedforbythecustomerandthenumberofusersontheplatform.

Inadditiontosubscription-basedfees,ELMOalsogeneratesrevenuefromchargingprofessionalservicefeesforprovidingnon-standardimplementation,configuration,trainingandintegrationservicesaswellasotherrevenueincludinggovernmentgrants.

1. Asat30June2017includesconstructionandmining,education,finance,government,healthcareandpharmaceuticals,hospitality,industrials,IT,telecommunicationsandmedia,not-for-profitorganisations,professionalservices,property,retailandtransport.

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AsummaryofELMO’srevenuemodelisprovidedbelow.

ELMO’S REVENUE MODEL

Customer% of FY17statutory revenue Revenue model Revenue recognition policy Description

Recurringrevenue

~93% SaaSsubscriptionfee

– ELMO’srecurringrevenueisrecognisedevenlyonamonthlybasis.Thebalanceoftherevenuereceivedinadvanceiscategorisedasaliability(knownasdeferredincome).

– ELMOtypicallyreceivesanannualfee,payableinadvanceoverthetermofthecontract

– Amountoffeevariesdependingonthenumberofmodulessubscribedforandthenumberofusersontheplatform

– Customersareinvoicedonanannualbasisthroughoutthetermofthecontract

Professionalservicesfees

~7% Consultationorintegrationfees

– ELMO’sprofessionalservicefeesarerecognisedasrevenueoncedeliveryoftherequiredservicesiscompleted

– ELMOreceivesaprofessionalservicefeeassociatedwithprovidingimplementation,configurationandintegrationservicesaswellasotherservices

– Feesaretypicallyinvoicedduringthefirstyearofthecontract

– Amountoffeevariesdependingonthelevelofserviceprovidedandcomplexityoftheprocess

Attractive cash flow profileELMO’sattractivefinancialandcashflowprofileissupportedbythehighrecurringrevenue,strongcustomerretentionratesandfavourablepaymenttermsasaresultoftheCompany’sSaaS-basedrevenuemodelwithlongtermcontractspaidannuallyinadvance,asexplainedbelow:

– high recurring revenues:ELMOhasahighproportionofrevenuethatisclassifiedasrecurringinnature(recurringrevenue)asshownbelow,whichisaresultofthesubscriptionbasedrevenuemodel.

FromFY15toFY17,ELMOhasconsistentlyachievedmorethan90%inrecurringsubscriptionrevenue.InFY17,93.0%ofELMO’sproformarevenuewasrecurringinnaturereflectingtheSaaSbusinessmodelandtheCompany’sfocusonsubscriptionrevenue.

ELMO’S RECURRING REVENUE AS A PERCENTAGE OF TOTAL PRO FORMA REVENUE

FY17FY16FY15

93.0%90.3%93.3%

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Operating and financial review

Financial Performance

Pro Forma HistoricalPro forma forecast Proforma FY17

A$ (’000) June year end FY16 FY17 FY17F

vs Pro Forma FY16

vs Forecast FY17

SaaSrevenue 12,588 15,735 15,706 25.00% 0.18%

OtherIncome 901 1,240 652 37.66% 90.23%

Total Revenue 13,489 16,975 16,358 25.84% 3.77%

CostofSales (1,242) (1,689) (1,593) 35.98% 6.01%

Gross Profit 12,247 15,286 14,765 24.82% 3.53%

SalesandMarketing (4,435) (6,397) (6,462) 44.23% -1.01%

ResearchandDevelopment (437) (338) (435) -22.66% -22.31%

GeneralandAdministration (5,808) (7,328) (7,007) 26.17% 4.58%

Total Operating Expenses (10,680) (14,063) (13,904) 31.68% 1.14%

EBITDA 1,567 1,223 861 -21.94% 42.07%

EBITDAMargin 11.62% 7.21% 5.26%

Pro Forma HistoricalPro forma forecast

Financial metrics FY16 FY17 FY17F

ProformaCashReceipts 15,704 19,039 19,035

ProFormaCashReceiptsasa%ofproformarevenue 116.4% 112.2% 116.4%

SaaSrevenueGrowth 40.4% 25.0% 24.8%

SaaSrevenueGrowth(exclTechniworks) 50% 31% 31%

RecurringRevenue 93.0% 92.7% 96.0%

RevenueRunRate

ProformaGrossMargin 91.0% 90.1% 90.0%

S&Mas%ofrevenue 33.0% 37.7% 40.0%

R&Das%ofrevenue(TotalR&DSpend) 16.0% 15.1% 15.0%

G&Aas%ofrevenue 43.0% 43.2% 43.0%

1. June2017SaaSrevenueannualised.

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Review of operations during the year

Forthefullyearended30June2017,ELMOreportedstatutoryrevenueof$16.6million(FY2016:$12.2million).ELMO’sstatutoryearningsbeforeincometax,financeexpenses,depreciationandamortisation(excludingdiscontinuedoperations)was$0.7million(FY2016:$1.7million)anditsstatutorynetlossaftertax(includingdiscontinuedoperations)was$0.9million(FY2016:profit$0.1million).

ThesestatutoryresultsincludesignificantexpensesrelatingtotheASXIPOlisting.IntheASXlistingprospectus,ELMOreportedfinancialresultsandforecastsonaproformabasis.ProformaadjustmentsreflecttheimpactoftheacquisitionofTechniWorks,theRTOdiscontinuedoperations,IPOoffercosts,standalonepubliccompanycostsandothernon-recurringitems.Forthefullyearended30June2017,ELMO’sproformarevenuewas$17.0million(FY2016:$13.5million),whichis3.77%aheadofProspectusforecastof$16.4million.ELMO’sproformaearningsbeforeincometax,financeexpenses,depreciationandamortisationwas$1.2million(FY2016:$1.6million),whichis42%aheadofProspectusforecastof$0.9million.ELMO’sproformanetlossaftertaxwas$0.1million(FY2016:netprofitaftertaxof$0.2million).

Thegrowthinrevenueduringtheperiodwasbeingdrivenby:

– ExpansionofELMO’scustomerbaseto524organisations(includingTechniWorkscustomers);

– IncreasedinvestmentintoELMO’ssalesandmarketingteam;

– EnhancedbrandawarenessandreputationofELMOanditsproductoffering;

– Increasedtractioninnewmodules,resultinginmorecross-sellandupsellopportunitiesamongstELMO’scustomerbase;

– ContinuedexpansionofELMO’soperationsinNewZealand;and

– Strongrecurringrevenuesof93%andhighrevenuedollarretentionratesof113%.

Forthefullyearended30June2017,ELMOreportedstatutoryoperatingexpenses(excludingdiscontinuedoperations)of$16.8million(2016:$10.8million)andadjustingfortheimpactoftheacquisitionofTechniWorks,one-offIPOcosts,standalonepubliccompanycostsandnon-recurringitemsthetotalproformaoperatingexpenseswere$14.1million(FY2016:$10.7million).ThekeydriverfortheincreaseinoperatingexpenseswasELMOscontinuedinvestmentinfuturegrowth.Therewasincreasedinvestmentinto:

– ELMO’ssalesandmarketing,whichreportedexpensesof$6.4million(statutoryandproforma),reflectinga44%increasecomparedtoproformaFY2016;

– ELMOactivelyseeksnewbusinessthroughasophisticatedmarketingstrategywithnewleadgenerationfromvariousmarketingactivitiesbothdigitalandnon-digitalresultinginthefollowingduringFY17:

– 17emailmarketingcampaigns

– 26ELMOsponsoredevents

– 15ELMOhostedevents;and

– Anincreaseingeneralandadministrativeexpensesfortheperioddrivenbyanincreaseinemploymentcoststo$1.9million(FY2016:$1.1million)duetoELMO’sdecisiontostrengthenitsinfrastructuretoscaleoperationsbyrecruitingmiddleandseniormanagement.

ELMO’s revenue growth was driven by new customer acquisition, increasing revenue per existing customer, enhanced brand awareness, traction of new modules and momentum in New Zealand.

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Risk management

TheGroup’soperationsandfinancialresultsaresubjecttoanumberofrisks.SomeoftheserisksarenotdirectlyunderELMO’scontrol.ThekeyrisksaffectingELMO,andthestepstakentomitigatetheserisksaredescribedbelow.

Failure to retain existing customers and attract new customers

ThesuccessofELMO’sbusinessreliesonitsabilitytoattractnewcustomersandtoretainandincreaserevenuefromexistingcustomers.

ELMO’scustomershavenoobligationtorenewtheirserviceofferingwhentheircontracttermendsandELMOcannotguaranteethatalloranyofitscustomerswillrenewtheircurrentserviceofferingafterthecompletionoftheircontractterm.ELMOalsocannotguaranteethatitwillsuccessfullyincreaserevenuefromitsexistingcustomersthroughtheabilitytocross-sellothermodulestothesamecustomers.

IfcustomersdonotcontinuetouseELMO’splatformanddonotincreasetheirusageovertime,andifnewcustomersdonotchoosetouseELMO’splatform,thegrowthinELMO’srevenuemayslow,ordecline,whichwillhaveanadverseimpactonELMO’soperatingandfinancialperformance.

Ability to attract and retain key personnel

AperceivedcriticalcomponentofthesuccessoftheCompanyistheongoingretentionofkeypersonnel,specifically,founderandCEO,DannyLessem,andmembersoftheseniormanagementandproductresearchanddevelopmentteams.

ThereisariskELMOmaynotbeabletoattractandretainkeypersonnelorbeabletofindeffectivereplacementsforthosekeypersonnelinatimelymanner.Thelossofsuchpersonnel,oranydelayintheirreplacement,couldhaveasignificantnegativeimpactonmanagement’sabilitytooperatethebusinessandachievefinancialperformancetargetsandstrategicgrowthobjectives.

Reliance on ELMO’s talent management software solutions and failure to adequately maintain and develop it

ELMO’sbusinessmodeldependsonELMO’sabilitytocontinuetoensurethatELMO’scustomersaresatisfiedwiththefunctionalityofELMO’stalentmanagementsoftwaresolutions.Themarketfortalentmanagementsoftwaresolutionsissubjecttoevolvingindustrystandards,changingregulationsaswellaseverchangingcustomerneeds,requirementsandpreferences.ELMO’ssuccesswilldependonitsabilitytoadaptandrespondeffectivelytothesechangesonatimelybasis.ThereisariskthatELMOmayfailtomaintainitssoftwareplatformadequatelyorthatfutureupdatesmayintroduceerrorsandperformanceissuescausingcustomersatisfactiontofall.AnyofthesefactorsmayresultinreducedsalesandusageofELMO’ssolutions,lossofcustomers,damagetoELMO’sreputationandaninabilitytoattractnewcustomers.

Reliance on up-take of SaaS-based talent management software solutions

ELMO’sfuturerevenueandgrowthdependsontheincreasingadoptionofSaaS-basedtalentmanagementsoftwaresolutions.ItmaybedifficultforELMOtopersuadepotentialcustomerstochangetheirexistinglegacyonpremise,manualpaper-basedorpointsolutionandadoptSaaS-basedtalentmanagementsolutionslikeELMO’s.IfELMO’ssolutionsarenotacceptedandusedbymoremid-marketorganisationsorifthemarketfortalentmanagementsolutionsfailstogrowasexpected,ELMO’splatformcouldbeadverselyaffectedandrevenuegrowthmayslow,whichcouldnegativelyimpactELMO’soperatingandfinancialperformance.

Failure to effectively manage growth

ELMOhasexperiencedaperiodofconsiderablegrowthinbothrevenue,employeenumbersandcustomerbase.BasedonELMO’sprojections,ELMOexpectsfurthergrowthinthefuturewhichcouldplacesignificantstrainonthecurrentmanagement,operationalandfinanceresourcesaswellastheinfrastructuresupportingELMO’splatform.FailuretoappropriatelymanagegrowthcouldresultinfailuretoretainexistingcustomersandafailuretoattractnewcustomerswhichcouldadverselyaffectELMO’soperatingandfinancialperformance.

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Failure to realise benefits from product research and development

Developingsoftwareandtechnologyisexpensiveandofteninvolvesanextendedperiodoftimetoachieveareturnoninvestment.ELMObelievesthatitmustcontinuetodedicateresourcestoELMO’sinnovationeffortstodevelopELMO’ssoftwareandtechnologyproductofferingandmaintaintheCompany’scompetitiveposition.

ELMOmaynothowever,receivebenefitsfromtheseinvestmentsforseveralyearsormaynotreceivebenefitsfromtheseinvestmentsatall.ThereisariskthatELMOmayfailtorealisebenefitsfromitsinnovationandproductdevelopmentrelatedcosts

Disruption or failure of technology and software systems

ELMOanditscustomersaredependentontheperformance,reliabilityandavailabilityofELMO’splatform,datacentresandcommunicationssystems(includingservers,theinternet,hostingservicesandthecloudenvironmentinwhichELMOprovidesitssolutions).

AnydisruptionorfailureofELMO’stechnologyandsoftwaresystemscouldpotentiallyleadtoalossofcustomers,legalclaimsbycustomers,andaninabilitytoattractnewcustomers,anyofwhichcouldadverselyimpactELMO’soperatingandfinancialperformance.

Loss or theft of data and failure of data security systems

ELMO’sproductsinvolvethestorageofcustomers’confidentialandproprietaryinformationincludinginformationregardingtheiremployees.ELMO’sbusinesscouldbemateriallyimpactedbysecuritybreachesofcustomerdataeitherbyunauthorisedaccess,theft,destruction,lossofinformationormisappropriationorreleaseofconfidentialcustomerdata.Thereisariskthatanymeasurestakenmaynotbesufficienttopreventordetectunauthorisedaccessto,ordisclosureof,suchconfidentialorproprietaryinformation,andanyoftheseeventsmaycausesignificantdisruptiontoELMO’sbusinessandoperations.ThismayalsoexposeELMOtoreputationaldamage,regulatoryscrutinyandfines,anyofwhichcouldmateriallyimpactELMO’soperatingandfinancialperformance.

Success of sales and marketing strategy

ELMO’sfuturesuccessispartlydependentontherealisationofbenefitsfrominvestmentspentonsalesandmarketingcampaignsandinitiatives.FailuretorealiseintendedbenefitsfromsalesandmarketinginvestmentcouldnegativelyimpactELMO’sabilitytoattractnewcustomersandadverselyimpactELMO’soperatingandfinancialperformance.

Revenue recognised throughout term of customer contracts

ELMOinvoicescustomersannuallyinadvanceandrecognisesrevenuemonthlyonapro-ratedbasisthroughoutthetermofthecontract.Asaresult,mostoftherevenuerealisedinanygivenperiodrelatestoagreementsenteredintoduringpreviousperiods.Consequently,ashortfallindemandforELMO’ssolutionsorlossesintheexistingcustomerbasemaynotbereflectedintherevenueresultsofthatperiodbutarelikelytonegativelyimpactrevenueinsubsequentperiods.Accordingly,theeffectofashortfallinrevenuefromELMO’splatformmaynotbefullyreflectedinthefinancialperformanceuntilfutureperiods.

Other key risks Theaboverisksareasummaryofsomeofthekeyrisks,butnotanexhaustivelistofalloftherisksassociatedwiththeCompanyoraninvestmentintheShares.InvestorsarerecommendedtocarefullyreviewallrisksincludedinSection5oftheProspectusbeforemakinganinvestmentdecision.

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Environment, social and governance

ELMOisfocussedinbuildinganorganisationthatsupportsitspeople,fostersinnovation,andaimsforsustainablegrowth.

ELMOniansAsagrowingorganisationacrossAustraliaandNewZealand,ELMOhasofficesinSydney,Melbourne,PerthandAuckland.ELMOvaluesourELMOniansdiversityandbelievesthatarangeofcultures,beliefsandethnicitiesbringsavarietyofideas,thoughts,perspectivesandexperiencesthatcreateaninnovativeandproductiveworkenvironment.

Corporate Social ResponsibilityELMOiscommittedtobeingactivelyinvolvedinworthycauseswithinthecommunitywhereitislocated.AtELMOwehaveestablishedourcorporatesocialresponsibility(CSR)policytosupportthisactivityandcommunicatesourcommitment,financialassistance,communitysupportandcorporatesponsorshipinthecommunity.OurCSRaimstosupportourpeopleinaninitiativethattheycareabout,theAustraliancommunity,allwhilecontributingtoAustralianeconomicdevelopment.

ThisyearELMOTalentsupported:

– RandwickChildren’sHospital

– VinniesCEOSleepout

– CancerCouncilsBiggestMorningTea

– RSPCAMillionPawsWalk

– RUOKDaymorningtea.

ELMOnian WellbeingELMOcaresaimstopromotethesafetyandwellbeingofourELMOnians.WeencourageourELMOnianstopracticesafeworkpracticesandcommunicatesuggestionsandimprovementstothebusiness.WeprovidesupportandopportunitiesthatencourageELMOnianstolookaftertheirhealthandfostersrelationshipinsideandoutsideoftheworkenvironment.Weconductanannualemployeeengagementandwelfaresurvey,withroutinepulsesurveystoidentifyneeds,feelingsand“mood”ofourELMOniansandourworkplace.Resultsofthesurveyareexplored,andsmallELMOnianworkgroupsareestablishedtoguidethebusinessinwhatinitiativeswouldbewelcomeandtothenchampioninitiativeslaunchedtothebusiness.

OurEmployeeAssistanceProgram(EAP)offersfreeshort-termcounsellingdesignedtohelpELMOnianspreventorresolvepersonal,familyandworkplaceproblemsaffectingtheirwell-beingandjobperformance.

Toastmasters ELMOSydneyToastmastersClubcommencedinMay2017.Toastmastershelpstobuildcommunicationandleadershipamongstemployeesinacollaborativeandsupportiveenvironment.WeencourageELMOnianstolistenandanswer,toplanandlead,togivefeedbackandtoacceptit.ToastmastersempowersELMOnianstobecomemoreeffectivecommunicatorsandleaders.WeplantoexpandtheELMOToastmasterstootherstatesinthefuture.

ELMOcompetedagainstsixotherclubsinourfirstAreacontest,andwonbothheats.WhatagreatstarttoourToastmasterjourney.

ELMOnians by function (% as at 30 June 2017)

13%

23%

10%

8%

20%

26%

General and administration

Business development

Account management

Marketing and support

ClientServices

Research and development

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Professional DevelopmentELMOisdedicatedtothesustainedgrowthofthebusinessthroughleadershipandmanagement.Weworkwithourmanagementteamanddetermineareasofinterestandenhancementtoconductinhousetrainingtwiceayear.Toguide,build,motivateandcohereourteamswerunconferencesuniquetoeachteamneeds,direction,andobjectives.

TheindividualELMOniandesiretogrowandlearnisfosteredthroughprofessionaldevelopmentthatsupportstheirowngrowthandthatofthebusiness.

WeexploretrainingandprofessionaldevelopmentopportunitieseachyeartoassistthebusinessandourELMOniansgrow,someofthesethatwehaveparticipatedinthisyear:

– AHRINationalConventionandStateConferences

– NationalandStateHRSummits

– HRTechSummitandHRTechFest

– HRLeaders’Summit

– ReimagineHR

– LocalGovernmentHRConference

– Not-for-profitPeopleConference

– WomeninLeadership

– TEDX

– GoogleCloudSummit

– Toastmasters

– Salesandproducttraining

EnvironmentELMOasitisgrowingislookingatopportunitiestoimproveouroperationsandenvironmentalfootprint.ELMOwhenconsideringthelongtermsustainablegrowthofthebusinesslookstomoveitsoperationstoworkenvironmentsthathasanuptodateBuildingEnergyEfficiencyCertificate,andNABERSrating.ELMOrelocateditsMelbourneofficethisyeartoaofficeenvironmentof3.5NABERSrating.TheintentioninthecomingyearistoconsolidatetheSydneyHeadOfficeintoacentrallocationwithaminimumof3.5NABERSrating.

Policy UpdateELMOinthispastyearhastakenconsiderableeffortinestablishingaQualityManagementSystem,anddevelopedpoliciesthatsupportbusinessactivityandenablethebusinesstooperateinasafeyetagilemanner.

Corporate Governance ELMOtakesadeliberateandfocussedapproachtocorporategovernanceandourcompliancewiththeCorporateGovernancePrinciplesandRecommendationsoftheASXCorporateGovernanceCouncilisdescribedinourCorporateGovernanceStatement,whichisavailablefromourwebsitehttp://investors.elmotalent.com.au/Investors/?page=Corporate-Governance

ELMO is focussed on building an organisation that supports its people, fosters innovation, and aims for sustainable growth.

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Board of Directors

James (Jim) McKerlieChairmanandIndependentNon-executiveDirector

MrJimMcKerlieistheChairmanandanindependentNon-executiveDirectorofELMO.Hehasover30yearsofexperienceacrossdigital,media,technology,energyandprofessionalservicesindustries.

JimiscurrentlytheChairmanofManaltoLimited,LithiumConsolidatedMineralsExplorationLimitedandBambuDigital.JimpreviouslyservedastheChairmanofDrillsearchEnergypriortoitbeingacquiredbyBeachEnergy(BPT.ASX),wherehecurrentlyservesasanindependentNon-executiveDirector.Inaddition,JimhasheldseniorrolesasPartnerinChargeatDeloitteToucheTohmatsu,ManagingPartneratKPMG,Chairmanofonthehouse.com.au,ExecutiveChairmanofBullseyeandChairmanofAcerEnergyandAmbassadorEnergy.

JimholdsaBachelorofEconomicsandaDiplomainFinancialManagementfromtheUniversityofNewEngland.HeisafellowoftheInstituteofCharteredAccountants,AustralianInstituteofCompanyDirectorsandInstituteofManagementConsultants.

Danny LessemCEO,ExecutiveDirectorandCo-founder

MrDannyLessemistheCEO,ExecutiveDirectorandco-founderofELMO.DannyisresponsibleforleadingthedevelopmentandexecutionoftheCompany’slongtermstrategyanddeliveringongrowthobjectivesforthebusiness.Dannyalsoplaysakeypartintheday-to-daymanagementoftheCompany’soperationsandhasbeencriticaltothesuccessofELMO,includingthestrategyunderpinningthedevelopmentoftheCompany’sfullsuiteoftalentmanagementsoftwaresolutions.

DannyhasextensiveexperienceinthetechnologyindustryhavingledSaaScompaniesforover15yearsinseniorroles,includingCompuTechnologieswherehewastheCEOandwasresponsibleforoverseeingthetransitionoftheCompany’sprimarybusinessfromadigitalagencytoaneLearningcontentprovider.

DannyholdsaBachelorofLaws(LL.B.)andBachelorsofArtsandLawfromtheUniversityofWitwatersrand,SouthAfrica.

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David HancockIndependentNon-executiveDirector

MrDavidHancockisanindependentNon-executiveDirectorofELMO.Hehasover25yearsexperienceinfinancialservicesandavarietyofgovernanceroles.

DavidiscurrentlyChairmanofFreedomInsuranceGroupLimited(FIG.ASX),ChairmanofFinclearPtyLimited,anASXgeneralandclearingparticipant,Non-executiveDirectoratTowerInsurance(TWR.ASX)andNon-executiveDirectorandChairmanoftheAuditandRiskCommitteeatAfterpay(AFY.ASX).

DavidwastheChiefExecutiveOfficeratTowerInsurance(TWR.ASX/NZX).

Priortothis,DavidhasbeenanExecutiveGeneralManagerattheCommonwealthBank(CBA.ASX)andwasManagingDirectorandHeadofAsia/Australia/JapanEquitiesforJPMorgan.

DavidisamemberoftheAustralianInstituteofCompanyDirectors(GAICD)andholdsaBachelorofBusinessfromtheQueenslandUniversityofTechnology(QUT).

DavidlivesinSydneyandismarriedandhastwoteenagesons.

Trevor Lonstein CFOandExecutiveDirector

MrTrevorLonsteinistheCFOandExecutiveDirectorofELMOandjoinedtheCompanyin2014.Trevorhasover15yearsofexperienceinaccountingandfinance.

Trevorisresponsibleforallaspectsoftheaccountingandfinancefunction,fromensuringefficient,controlledandtimelyrecordingandreportingsystems,tobudgeting,forecasting,andcashflowanalysis.

PriortojoiningELMO,TrevorownedandoperatedAdriteDigitalColourPrintingandheldseniorrolesasSeniorITProjectManageratAllensArthurRobinson,ShipsFinancialControlleratOrientCruiseLines–MVMarcoPoloandacareerofovereightyearsinauditingwithDeloitteToucheTohmatsu’smemberfirmsinEnglandandAustralia.

TrevorholdsaBachelorofCommerce(BCom)inAccountingandFinancefromtheUniversityofCapeTowninSouthAfricaandisaFellowoftheInstituteofCharteredAccountantsinEnglandandWales.

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Key Management Team

Danny LessemCEO,ExecutiveDirectorandCo-founder(Seepreviouspage)

Trevor LonsteinCFOandExecutiveDirector(Seepreviouspage)

Gordon StarkeyChiefOperatingOfficer

MrGordonStarkeyistheChiefOperatingOfficer(COO)ofELMOandjoinedtheCompanyin2007.GordonhasextensiveexperienceacrossenterpriseSaaSsolutions,includingroleswithresponsibilitiesacrossgeneralmanagement,businessdevelopment,productdesign,financialmanagementandstrategy.

GordonisresponsibleforoverseeingELMO’sbusinessdevelopment,salesandmarketing,productandclientservices.GordonisessentialtodrivingthestrategicdirectionoftheCompanyandmanagingpartnershipalignmentwithELMO’scustomers.

PriortojoiningELMOasaneLearning/LMSConsultant,Gordonservedinvariousteaching,consultingandresearchrolesatMacquarieUniversity.

GordonholdsaBachelorofBusinessAdministration(Hons)andaBachelorofPsychologyfromMacquarieUniversity.

Samuel SunChiefTechnologyOfficer

MrSamuelSunistheChiefTechnologyOfficer(CTO)ofELMOandjoinedtheCompanyin2010.Samuelhasover10yearsofexperienceinsoftwaredevelopmentroles.

AsCTOatELMO,Samuelisresponsibleforsettingtheoveralldirectionfortheorganisation’ssoftwareandtechnology,andmanagesthestrategy,architecture,engineering,design,governanceandinformationsecurityfunctionsofELMO’ssolutionsandplatform.

PriortojoiningELMOasaResearchandTechnicalDevelopmentManager,SamuelwasaLeadDeveloperatScholaniEducationCollegeandaSoftwareDeveloperatIBM.

SamuelholdsaMastersinInformationTechnologyfromtheUniversityofNSWandaBachelorofTelecommunicationEngineeringfromTongjiUniversity,China.

Monica WattGeneralManagerHumanResources

MrsMonicaWattisGeneralManagerHumanResourcesatELMO.Monicahasover10yearsofexperienceworkingacrosscomplianceandhumanresourceroles.

Monicaisresponsibleforoptimisingthebusinessperformancethroughinnovationandpeopleengagementandelevatingteamperformancethroughinnovativeleadership.Monicahasabroadrangeofexperienceinleadingorganisationaltransformations,drivinglargescalegrowth,talentacquisition,leadershipdevelopment,andsuccessionplanning.

PriortojoiningELMO,MonicawaspreviouslySeniorComplianceManageratOpenCollegesandInstructionalDesignerforSkillsDMC,TranspacificIndustriesandTAFENSW.SheisalsocurrentlyappointedasOfficerCommandingof204ArmyCadetUnit,TimorBarracks,Dundas,andholdstherankofCaptain(AAC)intheAustralianArmyCadets.

MonicaholdsaBachelorofCommerce,HumanResources

fromDeakinUniversity,aGraduateDiplomainManagementfromAustralianInstituteofBusiness,GraduateCertificateinManagementfromCharlesSturtUniversityandiscurrentlyworkingtowardsanMBAinHumanResourcesfromCharlesSturtUniversity.Inaddition,MonicaalsohasseveralTAFENSWQualifications,DiplomasandCertificates.

Darryl GarberHeadofCorporateDevelopmentandStrategy

MrDarrylGarberisHeadofCorporateDevelopmentandStrategyatELMOandjoinedtheCompanyin2011.Darrylhasoversevenyearsofexperienceinsales,marketing,corporatefinanceandmanagement.

Darrylisresponsibleforsourcing,evaluatingandexecutingELMO’sgrowthstrategyandinitiatives,whichinvolvesfinancingactivities,expansionopportunities,mergersandacquisitionandgo-to-marketproducts.

DarrylholdsaGraduateDiplomainAppliedFinancefromKaplanUniversityandanMBA(Dean’sList)fromBondUniversity.

Gordon Starkey, Samuel Sun, Trevor Lonstein, Danny Lessem, Monica Watt, Darryl Garber

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ELMO Soft ware Limited Financial report for the year ended 30 June 2017

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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 2017.

DirectorsThefollowingpersonsweredirectorsofElmoSoftwareLimitedduringthewholeofthefinancialyearanduptothedateofthisreport,unlessotherwisestated:

JamesDavidMcKerlie(appointedon5June2017)DannyIsaacLessemDavidCharlesHancock(appointedon5June2017)TrevorRaelLonstein(appointedon6March2017)ManuelGarber(resignedon5June2017)

DividendsNodividendwaspaidduringthefinancialyearended30June2017(2016:$nil).

Operating and financial review

Principal activitiesELMOisoneofAustraliaandNewZealand’sleadingprovidersofSoftware-as-a-Service(SaaS),cloud-basedtalentmanagementsoftwaresolutions.

ELMO’stalentmanagementsoftwaresolutionsenableorganisationstomanagethelifecycleofanemployeefromhiretoretireonasingleintegratedplatform.TheCompanydevelops,sellsandimplementsarangeofmodularsoftwareapplicationstoefficientlymanagehumanresource(HR)relatedprocessesincludingrecruitment,onboarding,performancemanagement,learninganddevelopmentandsuccessionplanning.ELMOalsoprovidesHRCore,asoftwaremodulewhichorganisationsuseforpeoplemanagementandemployeeself-service.ELMO’ssolutionsassistorganisationstobetteraddressandadapttothecomplexitiesoftheHumanCapitalManagement(HCM)industrywhileincreasingtheirproductivityandreducingcosts.

Significant changes to the businessOn7October2016,thecompanyacquired100%oftheordinarysharesofTechniWorksPtyLtdforatotalconsiderationof$2.1million(seenote15).TechniWorksisanAustralian-basedonlinelearningsolutionscompanyspecialisingintheprovisionofoff-the-shelfandcustom-builteLearningcoursesdevelopedspecificallyfortheAustralianworkenvironment.ThestrategicrationaleunderpinningtheacquisitionofTechniWorksincluded:

– EBITDAmarginexpansionfromsynergycostsavings;

– Lowintegrationrisk;

– Increasedmarketshareandenlargedcustomerbase;and

– ExpansionofELMO’seLearningcourselibrary.

On29June2017,ELMOcommencedtradingontheASXaftersuccessfullycompletinganInitialPublicOffer(IPO)of12.5millionnewsharestoraise$25.0million.ProceedsraisedfromtheIPOwillprovidefundingtosupportELMO’sgrowthstrategiesthroughincreasedinvestmenttowardsnewproductdevelopmentandsalesandmarketingaswellasexploringfutureacquisitionopportunities.Inaddition,ELMOanticipatesthattheIPOwillincreasebrandvalueandraisetheprofileofthecompany.

Duringthe2016financialyear,ELMO’smanagementmadethedecisiontodiscontinueitsRegisteredTrainingOrganisation(RTO)operationsfollowingastrategicdecisiontoapplygreaterfocustowardsgrowingtheCompany’scoreoffering,beingthedeliveryofcloud-basedtalentmanagementsoftwaresolutions.ELMO’sRTOoperationsceasedduringthesecondhalfofthe2017financialyear.

Review of operations during the yearCertainfinancialinformationinthereviewofoperationssectionbelowreferencingStatutoryEarningsBeforeInterest,Tax,DepreciationandAmortisation(“EBITDA”)hasbeenderivedfromtheauditedfinancialstatements.TheproformaEBITDA,proformarevenueandproformaoperatingexpensesarenon-IFRSfinancialinformationandassuchhavenotbeenauditedinaccordancewithAustralianAccountingStandards.

Forthefullyearended30June2017,ELMOreportedstatutoryrevenueof$16.6million(FY2016:$12.2million).ELMO’sstatutoryearningsbeforeincometax,financeexpenses,depreciationandamortisation(excludingdiscontinuedoperations)was$0.7million(FY2016:$1.7million)anditsstatutorynetlossaftertax(includingdiscontinuedoperations)was$0.9million(FY2016:profit$0.1million).

ThesestatutoryresultsincludesignificantexpensesrelatingtotheASXIPOlisting.IntheASXlistingprospectus,ELMOreportedfinancialresultsandforecastsonaproformabasis.ProformaadjustmentsreflecttheimpactoftheacquisitionofTechniWorks,theRTOdiscontinuedoperations,IPOoffercosts,standalonepubliccompanycostsandothernon-recurringitems.Forthefullyearended30June2017,ELMO’sproformarevenuewas$17.0million(FY2016:$13.5million),whichis3.7%aheadofProspectusforecastof$16.4million.ELMO’sproformaearningsbeforeincometax,financeexpenses,depreciationandamortisationwas$1.2million(FY2016:$1.6million),whichis42%aheadofProspectusforecastof$0.9million.ELMO’sproformanetlossaftertaxwas$0.1million(FY2016:netprofitaftertaxof$0.2million).

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Thegrowthinrevenueduringtheperiodwasbeingdrivenby:

– ExpansionofELMO’scustomerbaseto524organisations(includingTechniWorkscustomers);

– IncreasedinvestmentintoELMO’ssalesandmarketingteam;

– EnhancedbrandawarenessandreputationofELMOanditsproductoffering;

– Increasedtractioninnewmodules,resultinginmorecross-sellandupsellopportunitiesamongstELMO’scustomerbase;

– ContinuedexpansionofELMO’soperationsinNewZealand;and

– Strongrecurringrevenuesof93%andhighrevenuedollarretentionratesof113%.

Forthefullyearended30June2017,ELMOreportedstatutoryoperatingexpenses(excludingdiscontinuedoperations)of$16.8million(2016:$10.8million)andadjustingfortheimpactoftheacquisitionofTechniWorks,one-offIPOcosts,standalonepubliccompanycostsandnon-recurringitemsthetotalproformaoperatingexpenseswere$14.1million(FY2016:$10.7million).ThekeydriverfortheincreaseinoperatingexpenseswasELMOscontinuedinvestmentinfuturegrowth.Therewasincreasedinvestmentinto:

– ELMO’ssalesandmarketing,whichreportedexpensesof$6.4million(statutoryandproforma),reflectinga45%increasecomparedtoproformaFY2016;and

– Anincreaseingeneralandadministrativeexpensesfortheperioddrivenbyanincreaseinemploymentcoststo$1.9million(FY2016:$1.1million)duetoELMO’sdecisiontostrengthenitsinfrastructuretoscaleoperationsbyrecruitingmiddleandseniormanagement.

AreconciliationbetweenstatutoryEBITDAandproformaEBITDAisprovidedbelow.

Reconciliation of EBITDA

Year Ended 30 June 2017

$’000

Year Ended 30 June 2016

$’000

StatutoryEBITDA(excludingdiscontinuedoperations) 656 1,696

Add/(less)neteffectsof:

AcquisitionofTechniWorks 275 1,234

One-offIPOcosts 1,635 –

Additionallistedcompanycost (1,115) (1,135)

Othernon-recurringitems (229) (229)

Pro forma EBITDA 1,222 1,566

Financial positionAsat30June2017,ELMOhasnodebtandanetcashbalanceof$26.6million.ELMO’sproformacashreceiptsforthefullyearended30June2017was$19million,representing112.2%ofproformarevenuefortheperiod.Theconsolidatedentity’sstrongcashpositionisduetothefollowingfactors:

– IPO:ThelistingofELMOinJune2017resultedinaninjectionof$25millioncash(lessIPOcosts).

– Favourablepaymenttermsresultinginpositivecashflow:ELMOoperatesitsbusinessunderaSaaS-basedrevenuemodelwherebycustomerstypicallyenterintothreeyearcontractsandpayannuallicensefeesinadvance.

Theconsolidatedentity’sworkingcapital,beingcurrentassetslesscurrentliabilitieswasapositivepositionof$17.3million(2016:netcurrentliabilitiesof$2.8million).

Asaresultoftheabove,theDirectorsbelievetheconsolidatedentityisinastrongandstablepositiontoexpandandgrowitscurrentoperations.

Business growth strategy and likely developments – Greater usage from existing customers

ELMOaimstoincreaseusageofitssolutionsamongsttheexistingcustomerbasebyencouragingcustomerstosubscribetoadditionalmodules.ELMOplanstosupportthisviafurtherinvestmentintosalesandmarketingandbroadeningitstalentmanagementsoftwareoffering.

– Increasing market penetration in Australia and New ZealandELMOplanstoaccelerateitsmarketpenetrationacrossAustraliaandNewZealandbyincreasinginvestmentintoitssalesandmarketingcapabilitiesandinitiativestodrivenewcustomerwins.

– Expand product offeringELMOrecentlylauncheditssuccessionandHRadministrationmodule(HRCore)toexpanditssolutionsofferingandaimstolaunchtwonewmoduleswithinthenexttwoyears.

– AcquisitionsELMObelievesthatthereisanopportunitytogainadditionalmarketshareand/oracquirecomplementarytechnologythroughtargetedacquisitionsofotherHRmanagementsoftwarecompanies.

– Geographic expansionELMO’splatformhasbeendesignedandbuiltonagloballyscalableinfrastructurewhichoffersamulti-lingualandmulti-jurisdictionalcompatibleeLearningcourselibrary.ThisprovidesELMOwithopportunitiestopotentiallyexpandintootheroverseasgeographicregions.

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Matters subsequent to the end of the financial yearNoothermatterorcircumstancehasarisensince30June2017thathassignificantlyaffected,ormaysignificantlyaffecttheconsolidatedentity’soperations,theresultsofthoseoperations,ortheconsolidatedentity’sstateofaffairsinfuturefinancialyears.

Environmental regulationTheconsolidatedentityisnotsubjecttoanysignificantenvironmentalregulationunderAustralianCommonwealthorStatelaw.

Information on directors

Name: James (Jim) McKerlie

Title: ChairmanandIndependentNon-ExecutiveDirector

Qualifications: BachelorofEconomics(B.Ec)andaDiplomainFinancialManagementfromtheUniversityofNewEngland.HeisafellowoftheInstituteofCharteredAccountants,AustralianInstituteofCompanyDirectorsandInstituteofManagementConsultants.

Experienceandexpertise: Jimhasover30yearsofexperienceacrossdigital,media,technology,energyandprofessionalservicesindustries.JimhasheldseniorrolesasPartnerinChargeatDeloitteToucheTohmatsu,ManagingPartneratKPMG,Chairmanofonthehouse.com.au,ExecutiveChairmanofBullseyeandChairmanofAcerEnergyandAmbassadorEnergy.

Othercurrentdirectorships: ChairmanofManaltoLimited,LithiumConsolidatedMineralsExplorationLimitedandBambuDigital.IndependentNon-ExecutiveDirectorofBeachEnergy

Formerdirectorships(last3years): ChairmanofDrillsearchEnergypriortoitbeingacquiredbyBeachEnergy(BPT.ASX)

Specialresponsibilities: ChairmanoftheNominationandRemunerationCommitteeandMemberoftheAuditandRiskManagementCommittee

Interestsinshares: 50,000fullypaidordinaryShares

Interestsinoptions: None

Contractualrightstoshares: None

Name: Danny Lessem

Title: ExecutiveDirectorandChiefExecutiveOfficer

Qualifications: BachelorofLaws(LL.B)andBachelorofArtsandLawfromtheUniversityofWitwatersrand,SouthAfrica

Experienceandexpertise: DannyisresponsibleforleadingthedevelopmentandexecutionoftheCompany’slongtermstrategyanddeliveringongrowthobjectivesforthebusiness.Dannyalsoplaysakeypartintheday-to-daymanagementoftheCompany’soperationsandhasbeencriticaltothesuccessofELMO,includingthestrategyunderpinningthedevelopmentoftheCompany’sfullsuiteoftalentmanagementsoftwaresolutions.

DannyhasextensiveexperienceinthetechnologyindustryhavingledSaaScompaniesforover15yearsinseniorroles,includingCompuTechnologieswherehewastheCEOandwasresponsibleforoverseeingthetransitionoftheCompany’sprimarybusinessfromadigitalagencytoaneLearningcontentprovider.

Othercurrentdirectorships: None

Formerdirectorships(last3years): None

Specialresponsibilities: MemberoftheAuditandRiskManagementCommittee

Interestsinshares: 11,989,816ordinaryshares


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Name: David Hancock

Title: IndependentNon-ExecutiveDirector

Qualifications: BachelorofBusinessfromtheQueenslandUniversityofTechnology(QUT)andamemberoftheAustralianInstituteofCompanyDirectors(GAICD)

Experienceandexpertise: Davidhasover25years’experienceinfinancialservicesandavarietyofgovernanceroles.DavidhasbeenanExecutiveGeneralManagerattheCommonwealthBank(CBA:ASX)andwasManagingDirectorandHeadofAsia/Australia/JapanEquitiesforJPMorgan.

Othercurrentdirectorships: ChairmanofFreedomInsuranceGroupLimited(FIG.ASX),ChairmanofFinclearPtyLimited,anASXgeneralandclearingparticipant,Non-executiveDirectoratTowerInsurance(TWR.ASX)andNon-ExecutiveDirectorandChairmanoftheAuditandRiskCommitteeatAfterpay(AFY.ASX).

Formerdirectorships(last3years): ChiefExecutiveOfficeratTowerInsurance(TWR.ASX/NZX)

Specialresponsibilities: MemberoftheNominationandRemunerationCommitteeandtheChairmanofAuditandRiskManagementCommittee

Interestsinshares: None



Name: Trevor Lonstein

Title: ExecutiveDirectorandChiefFinancialOfficer

Qualifications: BachelorofCommerce(B.Com)inAccountingandFinancefromUniversityofCapeTown,SouthAfricaandisaFellowoftheInstituteofCharteredAccountantsinEnglandandWales.

Experienceandexpertise: Trevorisresponsibleforallaspectsoftheaccountingandfinancefunction,fromensuringefficient,controlledandtimelyrecordingandreportingsystems,tobudgeting,forecasting,andcashflowanalysis.

PriortojoiningELMO,TrevorownedandoperatedAdriteDigitalColourPrintingandheldseniorrolesasSeniorITProjectManageratAllensArthurRobinson,ShipsFinancialControlleratOrientCruiseLines–MVMarcoPoloandacareerofovereightyearsinauditingwithDeloitteToucheTohmatsu’smemberfirmsinEnglandandAustralia.

Othercurrentdirectorships: None

Formerdirectorships(last3years): None

Specialresponsibilities: MemberoftheNominationandRemunerationCommittee

Interestsinshares: 420,695ordinaryshares



‘Othercurrentdirectorships’quotedabovearecurrentdirectorshipsforlistedentitiesonlyandexcludesdirectorshipsofallothertypesofentities,unlessotherwisestated.

‘Formerdirectorships(last3years)’quotedabovearedirectorshipsheldinthelast3yearsforlistedentitiesonlyandexcludesdirectorshipsofallothertypesofentities,unlessotherwisestated.

Company SecretaryAnnaSandhamhasheldtheroleofCompanySecretarysince1May2017.Annaisanexperiencedcompanysecretaryandgovernanceprofessionalwithover20years’experienceinvariouslargeandsmall,publicandprivate,listedandunlistedcompanies.AnnahaspreviouslyworkedforcompaniesincludingAMPFinancialServices,WestpacBankingCorporation,BTFinancialGroupandNRMALimited.AnnaholdsaBachelorofEconomics(UniversityofSydney)andaGraduateDiplomaofAppliedCorporateGovernance(GovernanceInstituteofAustralia)andisaCharteredSecretaryandaFellowoftheGovernanceInstituteofAustralia.

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Meetings of directorsThenumberofmeetingsofthecompany’sBoardofDirectors(‘theBoard’)andofeachBoardcommitteeheldduringtheyearended30June2017,andthenumberofmeetingsattendedbyeachdirectorwere:

Attended Held

JamesMcKerlie 1 1

DannyLessem 2 2

DavidHancock 1 1

TrevorLonstein 1 1

ManuelGarber 1 1

Held:representsthenumberofmeetingsheldduringthetimethedirectorheldofficeorwasamemberoftherelevantcommittee.

TheNominationandRemunerationCommitteeandtheAuditCommitteewereformeduponlistingandnomeetingsheldpriortotheyearended30June2017.

Remuneration report (audited)Theremunerationreportdetailsthekeymanagementpersonnelremunerationarrangementsfortheconsolidatedentity,inaccordancewiththerequirementsoftheCorporationsAct2001anditsRegulations.

Keymanagementpersonnelarethosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheentity,directlyorindirectly,includingalldirectors.

Theremunerationreportissetoutunderthefollowingmainheadings:

– Principlesusedtodeterminethenatureandamountofremuneration

– Employeeincentivearrangements

– Detailsofremuneration

– Serviceagreements

– Share-basedcompensation

– Additionalinformation

– Additionaldisclosuresrelatingtokeymanagementpersonnel

Principles used to determine the nature and amount of remunerationTheobjectiveoftheconsolidatedentity’sexecutiverewardframeworkistoensurerewardforperformanceiscompetitiveandappropriatefortheresultsdelivered.Theframeworkalignsexecutiverewardwiththeachievementofstrategicobjectivesandthecreationofvalueforshareholders,anditisconsideredtoconformtothemarketbestpracticeforthedeliveryofreward.TheBoardofDirectors(‘theBoard’)ensuresthatexecutiverewardsatisfiesthefollowingkeycriteriaforgoodrewardgovernancepractices:

– competitivenessandreasonableness

– acceptabilitytoshareholders

– performancelinkage/alignmentofexecutivecompensation

– transparency

TheNominationandRemunerationCommitteeisresponsiblefordeterminingandreviewingremunerationarrangementsforitsdirectorsandexecutives.Theperformanceoftheconsolidatedentitydependsonthequalityofitsdirectorsandexecutives.Theremunerationphilosophyistoattract,motivateandretainhighperformanceandhighqualitypersonnel.

Therewardframeworkisdesignedtoalignexecutiverewardtoshareholders’interests.TheBoardhaveconsideredthatitshouldseektoenhanceshareholders’interestsby:

– achievingentityforecastsasacorecomponentofplandesign

– focusingonsustainedgrowthinshareholderwealth,consistingofgrowthinshareprice,deliveringconstantorincreasingreturnonassets,dividends,whendeemedappropriate,andaswellasfocusingtheexecutiveonkeynon-financialdriversofvalue

– attractingandretaininghighcalibreexecutives

Additionally,therewardframeworkshouldseektoenhanceexecutives’interestsby:

– rewardingcapabilityandexperience

– reflectingcompetitiverewardforcontributiontogrowthinshareholderwealth

– providingaclearstructureforearningrewards

Inaccordancewithbestpracticecorporategovernance,thestructureofnon-executivedirectorandexecutivedirectorremunerationisseparate.

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Non-executive Directors remunerationEachoftheNon-executiveDirectorshasenteredintoappointmentletterswithELMO,confirmingthetermsoftheirappointmentandtheirrolesandresponsibilities.

UndertheConstitution,theBoarddecidesthetotalamountpaidtoeachNon-executiveDirectorasremunerationfortheirservicesasaDirector.However,undertheASXListingRules,thetotalamountoffeespaidtoallDirectorsfortheirservices(excluding,forthesepurposes,thesalaryofanyExecutiveDirector)mustnotexceedinaggregateinanyfinancialyeartheamountfixedbytheCompanyingeneralmeeting.

ThisamounthasbeenfixedbytheCompanyat$750,000perannum(inclusiveofsuperannuation).AnychangetothataggregatedannualsumneedstobeapprovedbytheShareholders.TheaggregatesumdoesnotincludeanyspecialandadditionalremunerationforspecialexertionsandadditionalservicesperformedbyaDirectorasdeterminedappropriatebytheBoard.

AnnualaggregateNon-executiveDirectors’feescurrentlyagreedtobepaidbytheCompanyare$250,000perannum.ChairmanandindependentNon-executiveDirector,JimMcKerlie,willreceive$150,000(inclusiveofsuperannuation)perannumandindependentNon-executiveDirector,DavidHancock,willreceive$100,000(inclusiveofsuperannuation)perannum.

DirectorsmayalsobereimbursedforexpensesproperlyincurredbytheDirectorsinconnectionwiththeaffairsoftheCompanyincludingtravelandotherexpensesinattendingtotheCompany’saffairs.TheDirectors’feesdonotincludeacommissionon,orapercentageof,profitsorincome.

IfaDirectorrendersoriscalledontoperformextraservicesortomakeanyspecialexertionsinconnectionwiththeaffairsoftheCompany,theDirectorsmayarrangeforspecialremunerationtobepaidtothatDirector,eitherinadditiontoorinsubstitutionforthatDirector’sremunerationsetoutabove.

TherearenocontractualredundancyorretirementbenefitschemesforNon-executiveDirectors,otherthanstatutorysuperannuationcontributions.

Executive remunerationTheconsolidatedentityaimstorewardexecutivesbasedontheirpositionandresponsibility,withalevelandmixofremunerationwhichhasbothfixedandvariablecomponents.

Theexecutiveremunerationandrewardframeworkforthecurrentyearincluded:

– cashsalaryandfees

– salescommissionandbonuswhererelevanttospecifiedindividuals

– superannuation

Thecombinationofthesecomprisestheexecutive’stotalremuneration.

Fixedremuneration,consistingofbasesalary,feesandsuperannuationwillbereviewedannuallybytheNominationandRemunerationCommitteebasedonindividualandbusinessperformance,theoverallperformanceoftheconsolidatedentityandcomparablemarketremunerations.

Details of remunerationAmounts of remunerationDetailsoftheremunerationofkeymanagementpersonneloftheconsolidatedentityduringthefinancialyeararesetoutinthefollowingtables.

ThekeymanagementpersonneloftheconsolidatedentityconsistedofthefollowingdirectorsofElmoSoftwareLimited:

– JamesMcKerlie–ChairmanandIndependentNon-ExecutiveDirector

– DannyLessem–ExecutiveDirectorandChiefExecutiveOfficer

– DavidHancock–IndependentNon-ExecutiveDirector

– TrevorLonstein–ExecutiveDirectorandChiefFinancialOfficer

– ManuelGarber–ExecutiveDirector(resigned5June2017)

Andthefollowingpersons:

– GordonStarkey–ChiefOperatingOfficer

– XinSun–ChiefTechnologyOfficer

– MonicaWatt–GeneralManager–HumanResources

– DarrylGarber–HeadofCorporateDevelopmentandStrategy

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Thetablebelowprovidesremunerationforkeymanagementpersonnelforthe12monthsended30June2017.DuetothecompanylistinginJune2017withnoremunerationreportrequiredfortheyearended30June2016nocomparativesfortheyearended30June2016havebeendisclosed.

Short-term benefits

Post- employment

benefits

2017

Cash salary and fees

$

Sales commission

$Cash bonus

$

Super-annuation

$Total

$

Non-ExecutiveDirectors:

JamesMcKerlie(Chairman) 12,500 – – – 12,500

DavidHancock 8,333 – – – 8,333

ExecutiveDirectors:

DannyLessem 500,000 – – – 500,000

ManuelGarber 272,500 – – – 272,500

TrevorLonstein 76,923 – 30,000 7,308 114,231

OtherKeyManagementPersonnel:

TrevorLonstein 139,401 – – 13,243 152,644

GordonStarkey 220,899 158,208 45,662 38,151 462,920

XinSun 256,833 – – 24,399 281,232

MonicaWatt 150,685 – – 14,315 165,000

DarrylGarber 74,063 – – 6,997 81,060

1,712,137 158,208 75,662 104,413 2,050,420

Itshouldbenotedthaton5June2017theNon-ExecutiveDirectors,JamesMcKerlieandDavidHancockwereonlyappointedasDirectorsoftheCompanyandManuelGarberresignedasanExecutiveDirector,andtheremunerationhastherebybeendisclosedasappropriatefrom/untilthisdate.

Salescommissionandbonusfortheyearended30June2017wereonlyrecognizedinthefollowingcases:

– GordonStarkey,ChiefOperatingOfficerwhohasanagreedbenefitspackageincludingasalescommissionof2%receivedonnewbusinessandacashbonusbasedonrevenuetargetsasagreedbytheBoard.

– TrevorLonstein,ChiefFinancialOfficerwhoreceivedthebonusof$30,000uponthesuccessfullistingofthecompany.TrevorwasappointedasDirectoron6March2017,beforewhichtimehewasamemberofotherkeymanagementpersonnel.

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Additional disclosures relating to key management personnelShareholdingThenumberofsharesinthecompanyheldduringthefinancialyearbyeachdirectorandothermembersofkeymanagementpersonneloftheconsolidatedentity,includingtheirpersonallyrelatedparties,issetoutbelow:

As at 1 July 2016

Share subdivision1

Issued during the year

Post share split2

Purchased during IPO

As at 30 June 2017

Non-executiveDirectors

JimMcKerlie – – – – 50,000 50,000

DavidHancock – – – – – –

ExecutiveDirectors

DannyLessem 12 285 – 11,989,816 – 11,989,816

TrevorLonstein – – 10 420,695 – 420,695

ManuelGarber 12 285 – –3 – –

OtherKeyManagementPersonnel

GordonStarkey – – 10 420,695 90,250 510,945

XinSun – – 10 420,695 5,000 425,695

MonicaWatt – – – – 1,250 1,250

DarrylGarber – – 10 420,695 40,250 460,945

1. TheCompanyundertookasharesubdivisionwitharatioof23.75foreachofitsordinaryshares.2. TheCompanyundertookasharesplitwitharatioof42,069.53foreachofitsordinaryshares.3. NofurtherdisclosureshavebeenmadewithregardtoManuelGarberasheresignedasdirectoron5June2017priortotheIPOtakingplace.

Option holdingNiloptionsareheldbydirectorsorothermembersofkeymanagementpersonneloftheconsolidatedentity,includingtheirpersonallyrelatedparties.

Voting and comments to be made at the company’s Annual General Meeting (‘AGM’)AstheCompanyonlyconvertedtoapubliccompanyinMarchandonlylistedontheASXon27June2017,nopublicAGMwasheldinthepreviousfinancialyear.The2017AGMisexpectedtobeheldinNovember2017atwhichtimeshareholderswillhavetheopportunitytovoteonthisremunerationreportandprovidefeedbackregardingitsremunerationpractices.

Issue of shares and optionsNosharesoroptionshavebeenissuedinthelastfinancialyearasapartofshare-basedcompensation.

Forthefinancialyearsended30June2017and30June2016therewasnolinkbetweenCompanyperformanceandKMPremunerationwiththeexceptionofthoseindividualsdisclosedseparatelyabove.However,twooftheexecutivemembersoftheKMP(DannyLessemtheCEOandTrevorLonsteintheCFO)continuetoholdasubstantialshareholdingtherebyprovidingasignificantalignmentofinterestswithcompanyperformance.EachoftheseexecutiveKMPhavehadtheirexecutiveserviceagreements,particularlytheirbasepay,amendedtoreflecttheirrolesintheGroup.Fortheyearended30June2017,theearningspersharewere-2.20cents(2016:0.21cents).Sharesinthecompanyclosedon30June2017at$2.50.

Other transactions with key management personnel and their related partiesDuringthefinancialyear,therewerenoothertransactionswithkeymanagementpersonnelandtheirrelatedparties.

This concludes the section of the remuneration report which has been audited.

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Expected changes to remuneration for key management personnel for the year ending 30 June 2018 (unaudited)

Service agreementsFollowingthelistingofELMOinJune2017theremunerationandothertermsofemploymentforthefollowingdirectorsaredetailedasfollows:

Name: DannyLessem

Title: ExecutiveDirectorandChiefExecutiveOfficer

Details: Basesalaryfortheyearending30June2018of$500,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommitteewitha6monthterminationnoticebyeitherparty.IthasbeenagreedwiththeBoardthatforFY18DannyhaselectedwithBoardapprovalnottoparticipateinanyshorttermincentiveplanorlongtermincentiveprogram.FollowingthistimetheNominationandRemunerationCommitteewillapproveappropriateincentivearrangementsunderthenewincentiveschemes.

Name: TrevorLonstein

Title: ExecutiveDirectorandChiefFinancialOfficer

Details: Basesalaryfortheyearending30June2018of$300,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommittee.6monthterminationnoticebyeitherparty.TrevorwillbeeligibleforacashbonustobedeterminedbytheNominationandRemunerationCommitteedependentonfinancialperformanceofthecompanyandKPIachievementasagreedbytheBoard.Trevorisalsoeligibletoparticipateinthelongtermincentiveprogramsfortheyearending30June2018.

Name: GordonStarkey

Title: ChiefOperatingOfficer

Details: Basesalaryfortheyearending30June2018of$330,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommittee.1monthterminationnoticebyeitherparty.GordonwillbeeligibleforshorttermandlongtermincentivebenefitsundertheschemeslistedbelowasperNominationandRemunerationCommitteeapprovalandKPIachievement,non-solicitationandnon-competeclauses.

Name: XinSun

Title: ChiefTechnologyOfficer

Details: Basesalaryfortheyearending30June2018of$300,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommittee.30dayterminationnoticebyeitherparty.XinwillbeeligibleforshorttermandlongtermincentivebenefitsundertheschemeslistedbelowasperNominationandRemunerationCommitteeapprovalandKPIachievement,non-solicitationandnon-competeclauses.

Name: MonicaWatt

Title: GeneralManager–HumanResources

Details: Basesalaryfortheyearending30June2018of$175,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommittee.30dayterminationnoticebyeitherparty.MonicawillbeeligibleforshorttermandlongtermincentivebenefitsundertheschemeslistedbelowasperNominationandRemunerationCommitteeapprovalandKPIachievement,non-solicitationandnon-competeclauses.

Name: DarrylGarber

Title: HeadofCorporateDevelopmentandStrategy

Details: Basesalaryfortheyearending30June2018of$200,000includingsuperannuation,tobereviewedannuallybytheNominationandRemunerationCommittee.6monthterminationnoticebyeitherparty.DarrylwillbeeligibleforshorttermandlongtermincentivebenefitsundertheschemeslistedbelowasperNominationandRemunerationCommitteeapprovalandKPIachievement,non-solicitationandnon-competeclauses.

ELMOhasestablishedashorttermincentiveplanandlongtermincentiveprogramfortheyearending30June2018.

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Short term incentive plan (STI Plan)ELMOhasestablishedashorttermincentiveplanunderwhichemployeesmaybeprovidedwithacashbonusforachievementagainstkeyperformancemetrics.

ParticipationintheSTIPlanwillbedeterminedatthediscretionoftheBoard.Keyperformancemetricswillgenerallyrelatetoconditionsthatarewithinthecontroloftheemployee,forexampledivisionalprofittargets,strategicmeasuresorothersuchconditionsasELMOmaydecide.SubjecttothediscretionoftheBoard,theSTIPlanhasbeenstructuredbasedontheoverallremunerationstructuretobeadoptedbyELMOsuchthat60%ofanemployee’stotalpackagewillconsistoffixedpayand40%asperformancepay,withtheperformancepaycomponentdividedsuchthat60%willbebasedonshorttermperformanceand40%oflongtermperformance.ThequantumofanyrewardwillbedeterminedbytheBoard.

AmountstobepaidtoemployeesundertheSTIPlanwilltypicallybepaidafterthereleaseoffullfinancialyearauditedresults,andinaccordancewiththeannualreviewprocess.

Long-term incentive program (LTI Program)ELMOhasestablishedbothaSeniorExecutiveEquityPlan(SEEP)andaHighPerformerEquityPlan(HPEP)aspartofitsLTIProgram.

EquityincentivesundertheSEEPortheHPEPmaybegrantedtoemployees(orsuchotherpersonthattheBoarddeterminesiseligibletoparticipate)inrespectofFY18andbeyond.OfferswillbemadeatthediscretionoftheBoard.ThetermsoftheincentivesgrantedundertheseplanswillbedeterminedbytheBoardatgrantandmaythereforevaryovertime.ELMOwillregularlyassesstheappropriatenessofitsincentiveplansandmayamendorreplace,suspendorceaseusingeitherorbothoftheSEEPorHPEPifconsideredappropriatebytheBoard.

The Senior Executive Equity Plan (SEEP)TheSEEPisintendedtoaligntheinterestsoftheseniorexecutiveswithShareholders.AwardsundertheSEEPwillbestructuredasanoptiontoreceiveSharesatafuturedatesubjecttotherecipientpayingtheexerciseprice(SEEPOption).TherulesoftheSEEPwillprovidetheBoardwiththeflexibilitytoawardrestrictedshares,performancerightsandoptions,andtocashsettleanyaward,atthediscretionoftheBoard.

GrantsundertheSEEPareexpectedtobemadeannuallyandwillbemadetotheseniorexecutiveteamandsuchotherexecutivesastheBoardmaydeterminefromtimetotime.AnygrantswillbemadesubjecttotheASXListingRules,totheextentapplicable.

Shares under optionTherearenilunissuedordinarysharesofElmoSoftwareLimitedunderoptionatthedateofthisreport.

Shares issued on the exercise of optionsTherewerenilordinarysharesofElmoSoftwareLimitedissuedduringtheyearended30June2017anduptothedateofthisreportontheexerciseofoptions.

Indemnity and insurance of officersThecompanyhasindemnifiedthedirectorsandexecutivesofthecompanyforcostsincurred,intheircapacityasadirectororexecutive,forwhichtheymaybeheldpersonallyliable,exceptwherethereisalackofgoodfaith.

Duringthefinancialyear,thecompanypaidapremiuminrespectofacontracttoinsurethedirectorsandexecutivesofthecompanyagainstaliabilitytotheextentpermittedbytheCorporationsAct2001.Thecontractofinsuranceprohibitsdisclosureofthenatureoftheliabilityandtheamountofthepremium.

Indemnity and insurance of auditorThecompanyhasnot,duringorsincetheendofthefinancialyear,indemnifiedoragreedtoindemnifytheauditorofthecompanyoranyrelatedentityagainstaliabilityincurredbytheauditor.

Duringthefinancialyear,thecompanyhasnotpaidapremiuminrespectofacontracttoinsuretheauditorofthecompanyoranyrelatedentity.

Proceedings on behalf of the companyNopersonhasappliedtotheCourtundersection237oftheCorporationsAct2001forleavetobringproceedingsonbehalfofthecompany,ortointerveneinanyproceedingstowhichthecompanyisapartyforthepurposeoftakingresponsibilityonbehalfofthecompanyforallorpartofthoseproceedings.

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Directors’ report

Non-audit servicesDetailsoftheamountspaidorpayabletotheauditorfornon-auditservicesprovidedduringthefinancialyearbytheauditorareoutlinedinnote26tothefinancialstatements.

Thedirectorsaresatisfiedthattheprovisionofnon-auditservicesduringthefinancialyear,bytheauditor(orbyanotherpersonorfirmontheauditor’sbehalf),iscompatiblewiththegeneralstandardofindependenceforauditorsimposedbytheCorporationsAct2001.

Thedirectorsareoftheopinionthattheservicesasdisclosedinnote26tothefinancialstatementsdonotcompromisetheexternalauditor’sindependencerequirementsoftheCorporationsAct2001forthefollowingreasons:

– allnon-auditserviceshavebeenreviewedandapprovedtoensurethattheydonotimpacttheintegrityandobjectivityoftheauditor;and

– noneoftheservicesunderminethegeneralprinciplesrelatingtoauditorindependenceassetoutinAPES110CodeofEthicsforProfessionalAccountantsissuedbytheAccountingProfessionalandEthicalStandardsBoard,includingreviewingorauditingtheauditor’sownwork,actinginamanagementordecision-makingcapacityforthecompany,actingasadvocateforthecompanyorjointlysharingeconomicrisksandrewards.

Officers of the company who are former partners of Deloitte Touche TohmatsuJamesMcKerlie,ChairmanandNon-ExecutiveDirector,isaformerpartnerofDeloitteToucheTohmatsubutnotatatimewhentheauditfirmundertookanauditofthecompany.

Rounding of amountsThecompanyisofakindreferredtoinCorporationsInstrument2016/191,issuedbytheAustralianSecuritiesandInvestmentsCommission,relatingto‘rounding-off’.AmountsinthisreporthavebeenroundedoffinaccordancewiththatCorporationsInstrumenttothenearestthousanddollars,orincertaincases,thenearestdollar.

Auditor’s independence declarationAcopyoftheauditor’sindependencedeclarationasrequiredundersection307CoftheCorporationsAct2001issetoutimmediatelyafterthisdirectors’report.

AuditorDeloitteToucheTohmatsucontinuesinofficeinaccordancewithsection327oftheCorporationsAct2001.

Thisreportismadeinaccordancewitharesolutionofdirectors,pursuanttosection298(2)(a)oftheCorporationsAct2001.

On behalf of the directors

Danny Lessem Trevor LonsteinDirector Director

30August2017Sydney

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Auditor’s independence declaration

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

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

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30 August 2017 The Board of Directors Elmo Software Limited Westfield Tower One Level 25, Suite 2502 520 Oxford Street Bondi Junction NSW 2022 Dear Board Members

Elmo Software Limited

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 year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Joshua Tanchel Partner Chartered Accountants

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Statement of profit or loss and other comprehensive income For the year ended 30 June 2017

Consolidated

Note2017

$’0002016

$’000

Revenuefromrenderingofservices 3 16,564 12,179

Costofsales (1,679) (1,190)

Grossprofit 14,885 10,989 Interestincome 31 49

Otherincome 4 125 22

Salesandmarketingexpenses 5 (6,397) (4,434)

Researchanddevelopmentexpenses (338) (437)

Generalandadministrativeexpenses 5 (10,031) (5,927)

(Loss)/profit before income tax benefit from continuing operations1 (1,725) 262

Incometaxbenefit 6 978 275

(Loss)/profitafterincometaxbenefitfromcontinuingoperations (747) 537

Lossafterincometaxbenefitfromdiscontinuedoperations 7 (173) (450)

(Loss)/profit after income tax benefit (920) 87 Othercomprehensiveincomefortheyear,netoftax – –

Total (comprehensive loss)/comprehensive income for the year attributable to the owners of Elmo Software Limited (920) 87

Cents Cents

Earnings per share

Fromcontinuingoperations

Basicearnings 33 (1.79) 1.34

Dilutedearnings 33 (1.79) 1.34 Earnings per share

Fromdiscontinuedoperations

Basicearnings 33 (0.41) (1.13)

Dilutedearnings 33 (0.41) (1.13)

Theabovestatementofprofitorlossandothercomprehensiveincomeshouldbereadinconjunctionwiththeaccompanyingnotes

1 Includes$1.635mofIPOrelatedcostsasperNote5totheFinancialStatements.

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Statement of financial positionAs at 30 June 2017

Consolidated

Note2017

$’0002016

$’000

Assets

Current assets

Cashandcashequivalents 8 26,601 3,017

Tradeandotherreceivables 9 3,568 2,227

IncometaxandR&Drefundable 10 503 536

Othercurrentassets 11 372 244

Totalcurrentassets 31,044 6,024

Non-current assets

Deferredtax 18 99 –

Property,plantandequipment 12 506 385

Intangibleassetsandcapitalisedcosts 13 5,971 2,951

Totalnon-currentassets 6,576 3,336 Total assets 37,620 9,360 Liabilities

Current liabilities

Tradeandotherpayables 14 3,014 1,446

Businesscombinationliability 15 1,000 –

Employeebenefits 16 654 454

Revenuereceivedinadvance 17 9,072 6,966

Totalcurrentliabilities 13,740 8,866

Non-current liabilities

Deferredtax 18 – 408

Employeebenefits 19 115 114

Totalnon-currentliabilities 115 522 Total liabilities 13,855 9,388 Net assets/(liabilities) 23,765 (28) Equity

Issuedcapital 21 25,110 350

Accumulatedlosses 22 (1,298) (378)

Reserves 24 (47) –

EquityattributabletotheownersofElmoSoftwareLimited 23,765 (28)

Total equity/(Total deficit) 23,765 (28)

TheabovestatementoffinancialpositionshouldbereadinconjunctionwiththeaccompanyingnotesFor

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Statement of changes in equityFor the year ended 30 June 2017

ConsolidatedIssued capital

$’000

Foreign currency

translation reserves

$’000

Accumulated losses $’000

Total deficit $’000

Balanceat1July2015 350 – (465) (115)

Profitafterincometaxbenefitfortheyear – – 87 87

Othercomprehensiveincomefortheyear,netoftax – – – –

Totalcomprehensiveincomefortheyear – – 87 87

Balanceat30June2016 350 – (378) (28)

ConsolidatedIssued capital

$’000

Foreign currency

translation reserves

$’000

Retained profits $’000

Total (deficit)/ equity $’000

Balanceat1July2016 350 – (378) (28)

Lossafterincometaxbenefitfortheyear – – (920) (920)

Othercomprehensiveincomefortheyear,netoftax – – – –

Totalcomprehensivelossfortheyear – – (1,298) (948)

Transactionswithownersintheircapacityasowners:

IssueofsharestothepubliconIPO(netofissuecosts) 23,515 – – 23,515

Issueofemployeesgiftshares 45 – – 45

IssueofFClasssharecapital 1,200 – – 1,200

Reserves – (47) – (47)

Balanceat30June2017 25,110 (47) (1,298) 23,765

Theabovestatementofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotes

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Statement of cash flowsFor the year ended 30 June 2017

Consolidated

Note2017

$’0002016

$’000

Cash flows from operating activities

Receiptsfromcustomers(inclusiveofGST) 18,527 14,693

Paymentstosuppliersandemployees(inclusiveofGST) (15,529) (12,086)

2,998 2,607

Interestandotherfinancecostspaid (21) (23)

Incometaxesrefunded 578 705

Netcashfromoperatingactivities 32 3,555 3,289 Cash flows from investing activities

Interestreceived 31 49

Paymentsforproperty,plantandequipment (308) (251)

Paymentsforintangibles (2,764) (2,259)

Advancestorelatedparty – (7)

PaymentforpurchaseofTechniWorksGroup,netofcashacquired (1,046) –

Netcashusedininvestingactivities (4,087) (2,468) Cash flows from financing activities

Proceedsfromissueofshares 26,200 –

Shareissuetransactioncosts (2,084) –

Dividendspaid 23 – –

Repaymentofrelatedpartyadvances – (500)

Netcashfrom/(usedin)financingactivities 24,116 (500)

Netincreaseincashandcashequivalents 23,584 321

Cashandcashequivalentsatthebeginningofthefinancialyear 3,017 2,696

Cashandcashequivalentsattheendofthefinancialyear 8 26,601 3,017

Theabovestatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotes

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Notes to the financial statements30 June 2017

Note 1. Significant accounting policiesTheprincipalaccountingpoliciesadoptedinthepreparationofthefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.

New or amended Accounting Standards and Interpretations adoptedTheconsolidatedentityhasadoptedalloftheneworamendedAccountingStandardsandInterpretationsissuedbytheAustralianAccountingStandardsBoard(‘AASB’)thataremandatoryforthecurrentreportingperiod.

Basis of preparationThesegeneralpurposefinancialstatementshavebeenpreparedinaccordancewithAustralianAccountingStandardsandInterpretationsissuedbytheAustralianAccountingStandardsBoard(‘AASB’)andtheCorporationsAct2001,asappropriateforfor-profitorientedentities.ThesefinancialstatementsalsocomplywithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard(‘IASB’).

Historical cost conventionThefinancialstatementshavebeenpreparedunderthehistoricalcostconvention.

Critical accounting estimatesThepreparationofthefinancialstatementsrequirestheuseofcertaincriticalaccountingestimates.Italsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheconsolidatedentity’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatements,aredisclosedinnote2.

Parent entity informationInaccordancewiththeCorporationsAct2001,thesefinancialstatementspresenttheresultsoftheconsolidatedentityonly.Supplementaryinformationabouttheparententityisdisclosedinnote29.

Principles of consolidationTheconsolidatedfinancialstatementsincorporatetheassetsandliabilitiesofallsubsidiariesofElmoSoftwareLimited(‘company’or‘parententity’)asat30June2017andtheresultsofallsubsidiariesfortheyearthenended.ElmoSoftwareLimitedanditssubsidiariestogetherarereferredtointhesefinancialstatementsasthe‘consolidatedentity’.

Subsidiariesareallthoseentitiesoverwhichtheconsolidatedentityhascontrol.Theconsolidatedentitycontrolsanentitywhentheconsolidatedentityisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttheactivitiesoftheentity.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheconsolidatedentity.Theyarede-consolidatedfromthedatethatcontrolceases.

Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenentitiesintheconsolidatedentityareeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceoftheimpairmentoftheassettransferred.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheconsolidatedentity.

Theacquisitionofsubsidiariesisaccountedforusingtheacquisitionmethodofaccounting.Achangeinownershipinterest,withoutthelossofcontrol,isaccountedforasanequitytransaction,wherethedifferencebetweentheconsiderationtransferredandthebookvalueoftheshareofthenon-controllinginterestacquiredisrecogniseddirectlyinequityattributabletotheparent.

Operating segmentsOperatingsegmentsarepresentedusingthe‘managementapproach’,wheretheinformationpresentedisonthesamebasisastheinternalreportsprovidedtotheChiefOperatingDecisionMakers(‘CODM’).TheCODMisresponsiblefortheallocationofresourcestooperatingsegmentsandassessingtheirperformance.

Foreign currency translationThefinancialstatementsarepresentedinAustraliandollars,whichisElmoSoftwareLimited’sfunctionalandpresentationcurrency.

Foreign currency transactionsForeigncurrencytransactionsaretranslatedintoAustraliandollarsusingtheexchangeratesprevailingatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatfinancialyear-endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedinprofitorloss.

Foreign operationsTheassetsandliabilitiesofforeignoperationsaretranslatedintoAustraliandollarsusingtheexchangeratesatthereportingdate.TherevenuesandexpensesofforeignoperationsaretranslatedintoAustraliandollarsusingtheaverageexchangerates,whichapproximatetheratesatthedatesofthetransactions,fortheperiod.Allresultingforeignexchangedifferencesarerecognisedinothercomprehensiveincomethroughtheforeigncurrencyreserveinequity.

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Revenue recognitionRevenueisrecognisedwhenitisprobablethattheeconomicbenefitwillflowtotheconsolidatedentityandtherevenuecanbereliablymeasured.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.

Rendering of servicesServicesrevenueispredominantlyfromrecurringrevenuesassociatedwiththecloud-basedTalentManagementSoftwareSolutions.Theagreementswithcustomersdonotincludegeneralrightsofreturnanddonotprovidecustomerswiththerighttotakepossessionofthesoftwaresupportingtheservicesbeingprovided.Assuch,revenueisrecognizedinequalmonthlyamountsoverthelifeoftheagreement,usuallya3yearterm,whenallofthefollowingcriteriaareachieved:

– Thereispersuasiveevidenceofanagreement;

– Theservicehasbeenprovidedtothecustomer;

– Collectionofthefeesisreasonablyassured;and

– Theamountoffeestobepaidbythecustomerisfixedordeterminable.

InterestInterestrevenueisrecognisedasinterestaccruesusingtheeffectiveinterestmethod.Thisisamethodofcalculatingtheamortisedcostofafinancialassetandallocatingtheinterestincomeovertherelevantperiodusingtheeffectiveinterestrate,whichistheratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialassettothenetcarryingamountofthefinancialasset.

Other revenueOtherrevenueisrecognisedwhenitisreceivedorwhentherighttoreceivepaymentisestablished.

Government grantsGovernmentgrants,includingnon-monetarygrantsatfairvalue,areonlyrecognisedwhenthereisreasonableassurancethat:

a. allconditionsattachingtotheGovernmentgrantwillbecompliedwith;

b. thevalueofthegrantcanbedeterminedwithreasonablecertainty;and

c. thegrantwillbereceived.

Governmentgrantsarerecognisedasrevenueduringtheperiod,orperiodsinwhichtheexpensesforwhichthegrantsareintendedtocompensatearerecognised.

IftheGovernmentgrantcannotbedeterminedwithreasonablecertainty,thenthegrantisrecognisedasrevenuewhenitisreceived.

Cost of salesCostofsalesincludeswages,salariesandotherexpensesofemployeeswhocarryoutimplementation,trainingandsupportofsoftwareforcustomers.Costofsalesalsoincludesthirdpartyhostingcosts.

Income taxTheincometaxexpenseorbenefitfortheperiodisthetaxpayableonthatperiod’staxableincomebasedontheapplicableincometaxrateforeachjurisdiction,adjustedbythechangesindeferredtaxassetsandliabilitiesattributabletotemporarydifferences,unusedtaxlossesandtheadjustmentrecognisedforpriorperiods,whereapplicable.

ThemajorimpactontheincometaxexpenseisthebenefitobtainedfromtheResearch&DevelopmentTaxIncentivethatisbeingreceivedasataxrefund.

Deferredtaxassetsandliabilitiesarerecognisedfortemporarydifferencesatthetaxratesexpectedtobeappliedwhentheassetsarerecoveredorliabilitiesaresettled,basedonthosetaxratesthatareenactedorsubstantivelyenacted,exceptfor:

– Whenthedeferredincometaxassetorliabilityarisesfromtheinitialrecognitionofgoodwilloranassetorliabilityinatransactionthatisnotabusinesscombinationandthat,atthetimeofthetransaction,affectsneithertheaccountingnortaxableprofits;or

– Whenthetaxabletemporarydifferenceisassociatedwithinterestsinsubsidiaries,associatesorjointventures,andthetimingofthereversalcanbecontrolledanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.

Deferredtaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandlosses.

Thecarryingamountofrecognisedandunrecogniseddeferredtaxassetsarereviewedateachreportingdate.Deferredtaxassetsrecognisedarereducedtotheextentthatitisnolongerprobablethatfuturetaxableprofitswillbeavailableforthecarryingamounttoberecovered.Previouslyunrecogniseddeferredtaxassetsarerecognisedtotheextentthatitisprobablethattherearefuturetaxableprofitsavailabletorecovertheasset.

Deferredtaxassetsandliabilitiesareoffsetonlywherethereisalegallyenforceablerighttooffsetcurrenttaxassetsagainstcurrenttaxliabilitiesanddeferredtaxassetsagainstdeferredtaxliabilities;andtheyrelatetothesametaxableauthorityoneitherthesametaxableentityordifferenttaxableentitieswhichintendtosettlesimultaneously.

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Note 1. Significant accounting policies (continued)

Current and non-current classificationAssetsandliabilitiesarepresentedinthestatementoffinancialpositionbasedoncurrentandnon-currentclassification.

Anassetisclassifiedascurrentwhen:itiseitherexpectedtoberealisedorintendedtobesoldorconsumedintheconsolidatedentity’snormaloperatingcycle;itisheldprimarilyforthepurposeoftrading;itisexpectedtoberealisedwithin12monthsafterthereportingperiod;ortheassetiscashorcashequivalentunlessrestrictedfrombeingexchangedorusedtosettlealiabilityforatleast12monthsafterthereportingperiod.Allotherassetsareclassifiedasnon-current.

Aliabilityisclassifiedascurrentwhen:itiseitherexpectedtobesettledintheconsolidatedentity’snormaloperatingcycle;itisheldprimarilyforthepurposeoftrading;itisduetobesettledwithin12monthsafterthereportingperiod;orthereisnounconditionalrighttodeferthesettlementoftheliabilityforatleast12monthsafterthereportingperiod.Allotherliabilitiesareclassifiedasnon-current.

Deferredtaxassetsandliabilitiesarealwaysclassifiedasnon-current.

Cash and cash equivalentsCashandcashequivalentsincludescashatbank.

Trade and other receivablesTradereceivablesareinitiallyrecognisedatcostbeingtheircarryingvaluewhichisareasonableapproximationoftheirfairvalue.Tradereceivablesaregenerallydueforsettlementwithin30days.

Collectabilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectablearewrittenoffbyreducingthecarryingamountdirectly.Aprovisionforimpairmentoftradereceivablesisraisedwhenthereisobjectiveevidencethattheconsolidatedentitywillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofthereceivables.Significantfinancialdifficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisationanddefaultordelinquencyinpayments(morethan60daysoverdue)areconsideredindicatorsthatthetradereceivablemaybeimpaired.Theamountoftheimpairmentallowanceisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.Cashflowsrelatingtoshort-termreceivablesarenotdiscountediftheeffectofdiscountingisimmaterial.

Otherreceivablesarerecognisedatamortisedcost,lessanyprovisionforimpairment.

Property, plant and equipmentPlantandequipmentisstatedathistoricalcostlessaccumulateddepreciationandimpairment.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.

Depreciationiscalculatedonastraight-linebasistowriteoffthenetcostofeachitemofproperty,plantandequipment(excludingland)overtheirexpectedusefullivesasfollows:

Leaseholdimprovements 3–10yearsPlantandequipment 3–7yearsComputerequipment 2–4years

Theresidualvalues,usefullivesanddepreciationmethodsarereviewed,andadjustedifappropriate,ateachreportingdate.

Leaseholdimprovementsandplantandequipmentunderleasearedepreciatedovertheunexpiredperiodoftheleaseortheestimatedusefullifeoftheassets,whicheverisshorter.

Anitemofproperty,plantandequipmentisderecognisedupondisposalorwhenthereisnofutureeconomicbenefittotheconsolidatedentity.Gainsandlossesbetweenthecarryingamountandthedisposalproceedsaretakentoprofitorloss.Anyrevaluationsurplusreserverelatingtotheitemdisposedofistransferreddirectlytoretainedprofits.

LeasesThedeterminationofwhetheranarrangementisorcontainsaleaseisbasedonthesubstanceofthearrangementandrequiresanassessmentofwhetherthefulfilmentofthearrangementisdependentontheuseofaspecificassetorassetsandthearrangementconveysarighttousetheasset.

Adistinctionismadebetweenfinanceleases,whicheffectivelytransferfromthelessortothelesseesubstantiallyalltherisksandbenefitsincidentaltotheownershipofleasedassets,andoperatingleases,underwhichthelessoreffectivelyretainssubstantiallyallsuchrisksandbenefits.

Operatingleasepayments,netofanyincentivesreceivedfromthelessor,arechargedtoprofitorlossonastraight-linebasisoverthetermofthelease.F

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Intangible assetsIntangibleassetsacquiredaspartofabusinesscombination,otherthangoodwill,areinitiallymeasuredattheirfairvalueatthedateoftheacquisition.Intangibleassetsacquiredseparatelyareinitiallyrecognisedatcost.Indefinitelifeintangibleassetsarenotamortisedandaresubsequentlymeasuredatcostlessanyimpairment.Finitelifeintangibleassetsaresubsequentlymeasuredatcostlessamortisationandanyimpairment.Thegainsorlossesrecognisedinprofitorlossarisingfromthederecognitionofintangibleassetsaremeasuredasthedifferencebetweennetdisposalproceedsandthecarryingamountoftheintangibleasset.Themethodandusefullivesoffinitelifeintangibleassetsarereviewedannually.Changesintheexpectedpatternofconsumptionorusefullifeareaccountedforprospectivelybychangingtheamortisationmethodorperiod.

GoodwillGoodwillarisesontheacquisitionofabusiness.Goodwillisnotamortised.Instead,goodwillistestedannuallyforimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethatitmightbeimpaired,andiscarriedatcostlessaccumulatedimpairmentlosses.Impairmentlossesongoodwillaretakentoprofitorlossandarenotsubsequentlyreversed.

Software development costs – Research and developmentResearchcostsareexpensedintheperiodinwhichtheyareincurred.Developmentcostsarecapitalisedwhenitisprobablethattheprojectwillbeasuccessconsideringitscommercialandtechnicalfeasibility;theconsolidatedentityisabletouseorselltheasset;theconsolidatedentityhassufficientresources;andintenttocompletethedevelopmentanditscostscanbemeasuredreliably.

Softwaredevelopmentcostshaveafinitelifeandareamortisedonasystematicbasismatchedtothefutureeconomicbenefitsoverthe3yearusefullifeofthesoftware.

Capitalised sales commission costsCommissioncostspaidtoemployeesasaremunerationforsecuringanewcontractareamortisedonastraight-linebasisovertheperiodofthecontract(1–3years).

Customer listTheacquiredcustomerlistisamortisedovermanagement’sbestestimateofitsusefullifeover7yearsonastraight-linebasis.

Trade and other payablesTheseamountsrepresentliabilitiesforgoodsandservicesprovidedtotheconsolidatedentitypriortotheendofthefinancialyearandwhichareunpaid.Duetotheirshort-termnaturetheyaremeasuredatamortisedcostandarenotdiscounted.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.

BorrowingsLoansandborrowingsareinitiallyrecognisedatthefairvalueoftheconsiderationreceived,netoftransactioncosts.Theyaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.

Finance costsFinancecostsareexpensedintheperiodinwhichtheyareincurred.

Employee benefitsShort-term employee benefitsLiabilitiesforwagesandsalaries,includingnon-monetarybenefits,annualleaveandlongserviceleaveexpectedtobesettledwhollywithin12monthsofthereportingdatearemeasuredattheamountsexpectedtobepaidwhentheliabilitiesaresettled.

Other long-term employee benefitsTheliabilityforannualleaveandlongserviceleavenotexpectedtobesettledwithin12monthsofthereportingdatearemeasuredatthepresentvalueofexpectedfuturepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingtheprojectedunitcreditmethod.Considerationisgiventoexpectedfuturewageandsalarylevels,experienceofemployeedeparturesandperiodsofservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthereportingdateoncorporatebondswithtermstomaturityandcurrencythatmatch,ascloselyaspossible,theestimatedfuturecashoutflows.

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Fair value measurementWhenanassetorliability,financialornon-financial,ismeasuredatfairvalueforrecognitionordisclosurepurposes,thefairvalueisbasedonthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate;andassumesthatthetransactionwilltakeplaceeither:intheprincipalmarket;orintheabsenceofaprincipalmarket,inthemostadvantageousmarket.

Fairvalueismeasuredusingtheassumptionsthatmarketparticipantswouldusewhenpricingtheassetorliability,assumingtheyactintheireconomicbestinterests.Fornon-financialassets,thefairvaluemeasurementisbasedonitshighestandbestuse.Valuationtechniquesthatareappropriateinthecircumstancesandforwhichsufficientdataareavailabletomeasurefairvalue,areused,maximisingtheuseofrelevantobservableinputsandminimisingtheuseofunobservableinputs.

Assetsandliabilitiesmeasuredatfairvalueareclassified,intothreelevels,usingafairvaluehierarchythatreflectsthesignificanceoftheinputsusedinmakingthemeasurements.Classificationsarereviewedateachreportingdateandtransfersbetweenlevelsaredeterminedbasedonareassessmentofthelowestlevelofinputthatissignificanttothefairvaluemeasurement.

Forrecurringandnon-recurringfairvaluemeasurements,externalvaluersmaybeusedwheninternalexpertiseiseithernotavailableorwhenthevaluationisdeemedtobesignificant.Externalvaluersareselectedbasedonmarketknowledgeandreputation.Wherethereisasignificantchangeinfairvalueofanassetorliabilityfromoneperiodtoanother,ananalysisisundertaken,whichincludesaverificationofthemajorinputsappliedinthelatestvaluationandacomparison,whereapplicable,withexternalsourcesofdata.

Issued capitalOrdinarysharesareclassifiedasequity.

Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.

DividendsDividendsarerecognisedwhendeclaredduringthefinancialyearandnolongeratthediscretionofthecompany.

Business combinationsTheacquisitionmethodofaccountingisusedtoaccountforbusinesscombinationsregardlessofwhetherequityinstrumentsorotherassetsareacquired.

Theconsiderationtransferredisthesumoftheacquisition-datefairvaluesoftheassetstransferred,equityinstrumentsissuedorliabilitiesincurredbytheacquirertoformerownersoftheacquireeandtheamountofanynon-controllinginterestintheacquiree.Foreachbusinesscombination,thenon-controllinginterestintheacquireeismeasuredateitherfairvalueorattheproportionateshareoftheacquiree’sidentifiablenetassets.Allacquisitioncostsareexpensedasincurredtoprofitorloss.

Ontheacquisitionofabusiness,theconsolidatedentityassessesthefinancialassetsacquiredandliabilitiesassumedforappropriateclassificationanddesignationinaccordancewiththecontractualterms,economicconditions,theconsolidatedentity’soperatingoraccountingpoliciesandotherpertinentconditionsinexistenceattheacquisitiondate.

Wherethebusinesscombinationisachievedinstages,theconsolidatedentityremeasuresitspreviouslyheldequityinterestintheacquireeattheacquisition-datefairvalueandthedifferencebetweenthefairvalueandthepreviouscarryingamountisrecognisedinprofitorloss.

Contingentconsiderationtobetransferredbytheacquirerisrecognisedattheacquisition-datefairvalue.Subsequentchangesinthefairvalueofthecontingentconsiderationclassifiedasanassetorliabilityisrecognisedinprofitorloss.Contingentconsiderationclassifiedasequityisnotremeasuredanditssubsequentsettlementisaccountedforwithinequity.

Thedifferencebetweentheacquisition-datefairvalueofassetsacquired,liabilitiesassumedandanynon-controllinginterestintheacquireeandthefairvalueoftheconsiderationtransferredandthefairvalueofanypre-existinginvestmentintheacquireeisrecognisedasgoodwill.Iftheconsiderationtransferredandthepre-existingfairvalueislessthanthefairvalueoftheidentifiablenetassetsacquired,beingabargainpurchasetotheacquirer,thedifferenceisrecognisedasagaindirectlyinprofitorlossbytheacquirerontheacquisition-date,butonlyafterareassessmentoftheidentificationandmeasurementofthenetassetsacquired,thenon-controllinginterestintheacquiree,ifany,theconsiderationtransferredandtheacquirer’spreviouslyheldequityinterestintheacquirer.

Earnings per shareBasic earnings per shareBasicearningspershareiscalculatedbydividingtheprofitorlossattributabletotheownersofElmoSoftwareLimited,excludinganycostsofservicingequityotherthanordinaryshares,bytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear,adjustedforbonuselementsinordinarysharesissuedduringthefinancialyear.

Diluted earnings per shareDilutedearningspershareadjuststhefiguresusedinthedeterminationofbasicearningspersharetotakeintoaccounttheafterincometaxeffectofinterestandotherfinancingcostsassociatedwithdilutivepotentialordinarysharesandtheweightedaveragenumberofsharesassumedtohavebeenissuedfornoconsiderationinrelationtodilutivepotentialordinaryshares.

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Goods and Services Tax (‘GST’) and other similar taxesRevenues,expensesandassetsarerecognisednetoftheamountofassociatedGST,unlesstheGSTincurredisnotrecoverablefromthetaxauthority.Inthiscaseitisrecognisedaspartofthecostoftheacquisitionoftheassetoraspartoftheexpense.

ReceivablesandpayablesarestatedinclusiveoftheamountofGSTreceivableorpayable.ThenetamountofGSTrecoverablefrom,orpayableto,thetaxauthorityisincludedinotherreceivablesorotherpayablesinthestatementoffinancialposition.

Cashflowsarepresentedonagrossbasis.TheGSTcomponentsofcashflowsarisingfrominvestingorfinancingactivitieswhicharerecoverablefrom,orpayabletothetaxauthority,arepresentedasoperatingcashflows.

CommitmentsandcontingenciesaredisclosednetoftheamountofGSTrecoverablefrom,orpayableto,thetaxauthority.

Rounding of amountsThecompanyisofakindreferredtoinCorporationsInstrument2016/191,issuedbytheAustralianSecuritiesandInvestmentsCommission,relatingto‘rounding-off’.AmountsinthisreporthavebeenroundedoffinaccordancewiththatCorporationsInstrumenttothenearestthousanddollars,orincertaincases,thenearestdollar.

New Accounting Standards and Interpretations not yet mandatory or early adoptedAustralianAccountingStandardsandInterpretationsthathaverecentlybeenissuedoramendedbutarenotyetmandatory,havenotbeenearlyadoptedbytheconsolidatedentityfortheannualreportingperiodended30June2017.Theconsolidatedentity’sassessmentoftheimpactoftheseneworamendedAccountingStandardsandInterpretations,mostrelevanttotheconsolidatedentity,aresetoutbelow.

AASB 9 Financial InstrumentsThisstandardisapplicabletoannualreportingperiodsbeginningonorafter1January2018.ThestandardreplacesallpreviousversionsofAASB9andcompletestheprojecttoreplaceIAS39‘FinancialInstruments:RecognitionandMeasurement’.AASB9introducesnewclassificationandmeasurementmodelsforfinancialassets.Afinancialassetshallbemeasuredatamortisedcost,ifitisheldwithinabusinessmodelwhoseobjectiveistoholdassetsinordertocollectcontractualcashflows,whichariseonspecifieddatesandsolelyprincipalandinterest.Allotherfinancialinstrumentassetsaretobeclassifiedandmeasuredatfairvaluethroughprofitorlossunlesstheentitymakesanirrevocableelectiononinitialrecognitiontopresentgainsandlossesonequityinstruments(thatarenotheld-for-trading)inothercomprehensiveincome(‘OCI’).Forfinancialliabilities,thestandardrequirestheportionofthechangeinfairvaluethatrelatestotheentity’sowncreditrisktobepresentedinOCI(unlessitwouldcreateanaccountingmismatch).Newsimplerhedgeaccountingrequirementsareintendedtomorecloselyaligntheaccountingtreatmentwiththeriskmanagementactivitiesoftheentity.Newimpairmentrequirementswillusean‘expectedcreditloss’(‘ECL’)modeltorecogniseanallowance.Impairmentwillbemeasuredundera12-monthECLmethodunlessthecreditriskonafinancialinstrumenthasincreasedsignificantlysinceinitialrecognitioninwhichcasethelifetimeECLmethodisadopted.Thestandardintroducesadditionalnewdisclosures.Theconsolidatedentitywilladoptthisstandardfrom1July2018buttheimpactofitsadoptionisyettobeassessedbytheconsolidatedentity.

AASB 15 Revenue from Contracts with CustomersThisstandardisapplicabletoannualreportingperiodsbeginningonorafter1January2018.Thestandardprovidesasinglestandardforrevenuerecognition.Thecoreprincipleofthestandardisthatanentitywillrecogniserevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.Thestandardwillrequire:contracts(eitherwritten,verbalorimplied)tobeidentified,togetherwiththeseparateperformanceobligationswithinthecontract;determinethetransactionprice,adjustedforthetimevalueofmoneyexcludingcreditrisk;allocationofthetransactionpricetotheseparateperformanceobligationsonabasisofrelativestand-alonesellingpriceofeachdistinctgoodorservice,orestimationapproachifnodistinctobservablepricesexist;andrecognitionofrevenuewheneachperformanceobligationissatisfied.Creditriskwillbepresentedseparatelyasanexpenseratherthanadjustedtorevenue.Forgoods,theperformanceobligationwouldbesatisfiedwhenthecustomerobtainscontrolofthegoods.Forservices,theperformanceobligationissatisfiedwhentheservicehasbeenprovided,typicallyforpromisestotransferservicestocustomers.Forperformanceobligationssatisfiedovertime,anentitywouldselectanappropriatemeasureofprogresstodeterminehowmuchrevenueshouldberecognisedastheperformanceobligationissatisfied.Contractswithcustomerswillbepresentedinanentity’sstatementoffinancialpositionasacontractliability,acontractasset,orareceivable,dependingontherelationshipbetweentheentity’sperformanceandthecustomer’spayment.Sufficientquantitativeandqualitativedisclosureisrequiredtoenableuserstounderstandthecontractswithcustomers;thesignificantjudgmentsmadeinapplyingtheguidancetothosecontracts;andanyassetsrecognisedfromthecoststoobtainorfulfilacontractwithacustomer.Theconsolidatedentitywilladoptthisstandardfrom1July2018buttheimpactofitsadoptionisyettobeassessedbytheconsolidatedentity.

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New Accounting Standards and Interpretations not yet mandatory or early adopted (continued)AASB 16 LeasesThisstandardisapplicabletoannualreportingperiodsbeginningonorafter1January2019.ThestandardreplacesAASB117‘Leases’andforlesseeswilleliminatetheclassificationsofoperatingleasesandfinanceleases.Subjecttoexceptions,a‘right-of-use’assetwillbecapitalisedinthestatementoffinancialposition,measuredatthepresentvalueoftheunavoidablefutureleasepaymentstobemadeovertheleaseterm.Theexceptionsrelatetoshort-termleasesof12monthsorlessandleasesoflow-valueassets(suchaspersonalcomputersandsmallofficefurniture)whereanaccountingpolicychoiceexistswherebyeithera‘right-of-use’assetisrecognisedorleasepaymentsareexpensedtoprofitorlossasincurred.Aliabilitycorrespondingtothecapitalisedleasewillalsoberecognised,adjustedforleaseprepayments,leaseincentivesreceived,initialdirectcostsincurredandanestimateofanyfuturerestoration,removalordismantlingcosts.Straight-lineoperatingleaseexpenserecognitionwillbereplacedwithadepreciationchargefortheleasedasset(includedinoperatingcosts)andaninterestexpenseontherecognisedleaseliability(includedinfinancecosts).Intheearlierperiodsofthelease,theexpensesassociatedwiththeleaseunderAASB16willbehigherwhencomparedtoleaseexpensesunderAASB117.HoweverEBITDA(EarningsBeforeInterest,Tax,DepreciationandAmortisation)resultswillbeimprovedastheoperatingexpenseisreplacedbyinterestexpenseanddepreciationinprofitorlossunderAASB16.Forclassificationwithinthestatementofcashflows,theleasepaymentswillbeseparatedintobothaprincipal(financingactivities)andinterest(eitheroperatingorfinancingactivities)component.Forlessoraccounting,thestandarddoesnotsubstantiallychangehowalessoraccountsforleases.Theconsolidatedentitywilladoptthisstandardfrom1July2019buttheimpactofitsadoptionisyettobeassessedbytheconsolidatedentity.

Note 2. Critical accounting judgements, estimates and assumptionsThepreparationofthefinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffectthereportedamountsinthefinancialstatements.Managementcontinuallyevaluatesitsjudgementsandestimatesinrelationtoassets,liabilities,contingentliabilities,revenueandexpenses.Managementbasesitsjudgements,estimatesandassumptionsonhistoricalexperienceandonothervariousfactors,includingexpectationsoffutureevents,managementbelievestobereasonableunderthecircumstances.Theresultingaccountingjudgementsandestimateswillseldomequaltherelatedactualresults.Thejudgements,estimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilities(refertotherespectivenotes)withinthenextfinancialyeararediscussedbelow.

Estimation of useful lives of assetsTheconsolidatedentitydeterminestheestimatedusefullivesandrelateddepreciationandamortisationchargesforitsproperty,plantandequipmentandfinitelifeintangibleassets.Theusefullivescouldchangesignificantlyasaresultoftechnicalinnovationsorsomeotherevent.Thedepreciationandamortisationchargewillincreasewheretheusefullivesarelessthanpreviouslyestimatedlives,ortechnicallyobsoleteornon-strategicassetsthathavebeenabandonedorsoldwillbewrittenofforwrittendown.

Goodwill and other indefinite life intangible assetsTheconsolidatedentitytestsannually,ormorefrequentlyifeventsorchangesincircumstancesindicateimpairment,whethergoodwillandotherindefinitelifeintangibleassetshavesufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinnote1.Therecoverableamountsofcash-generatingunitshavebeendeterminedbasedonthefairvaluelesscoststosellcalculations.Thesecalculationsrequiretheuseofassumptions,includingestimateddiscountratesbasedonthecurrentcostofcapitalandgrowthratesoftheestimatedfuturecashflows.

Impairment of non-financial assets other than goodwill and other indefinite life intangible assetsTheconsolidatedentityassessesimpairmentofnon-financialassetsotherthangoodwillandotherindefinitelifeintangibleassetsateachreportingdatebyevaluatingconditionsspecifictotheconsolidatedentityandtotheparticularassetthatmayleadtoimpairment.Ifanimpairmenttriggerexists,therecoverableamountoftheassetisdetermined.Thisinvolvesfairvaluelesscostsofdisposalorvalue-in-usecalculations,whichincorporateanumberofkeyestimatesandassumptions.

Capitalisation of Software Development costs AsdiscussedinNote1internallygeneratedSoftwaredevelopmentcostsarecapitalisedwhenitisprobablethattheprojectwillbeasuccessconsideringitscommercialandtechnicalfeasibility;theconsolidatedentityisabletouseorselltheasset;theconsolidatedentityhassufficientresources;andintenttocompletethedevelopmentanditscostscanbemeasuredreliably.

Business combinationsAsdiscussedinnote1,businesscombinationsareinitiallyaccountedforonaprovisionalbasis.Thefairvalueofassetsacquired,liabilitiesandcontingentliabilitiesassumedareinitiallyestimatedbytheconsolidatedentitytakingintoconsiderationallavailableinformationatthereportingdate.Fairvalueadjustmentsonthefinalisationofthebusinesscombinationaccountingisretrospective,whereapplicable,totheperiodthecombinationoccurredandmayhaveanimpactontheassetsandliabilities,depreciationandamortisationreported.F

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Note 3. Revenue from rendering of services

Identification of reportable operating segmentsTheGroupoperatesinonesegment,basedontheinternalreportsthatarereviewedandusedbytheBoardofDirectors(whoareidentifiedastheChiefOperatingDecisionMakers(CODM))inassessingperformanceandindeterminingtheallocationofresources.

Asaresult,theoperatingsegmentinformationisdisclosedinthestatementsandnotestothefinancialstatements.

Geographical information

Revenue from external customers

Geographical non-current assets

2017 $’000

2016 $’000

2017 $’000

2016 $’000

Australia 16,396 12,097 6,439 3,330

NewZealand – – 32 –

Singapore 168 82 6 6

16,564 12,179 6,477 3,336

ThemajorityoftheGroup’srevenueisgeneratedfromsalescontractswithAustralian,SingaporeandNewZealandcompanies.Thegeographicsplitofthisrevenueacrossallcompaniesis:a)Australia(93.3%,2016:96.3%);b)NewZealand(5.3%,2016:2.7%);c)Singapore(1.0%,2016:0.7%);andd)Other(0.4%,2016:0.3%).

Thegeographicalnon-currentassetsaboveareexclusiveof,whereapplicable,financialinstruments,deferredtaxassets,post-employmentbenefitsassetsandrightsunderinsurancecontracts.

Note 4. Other income

Consolidated2017

$’0002016

$’000

Governmentgrants 72 –

Rentreceivedfromtemporarysub-leasingofoffice – 3

Otherincome 53 19

125 22

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Note 5. Expenses

Consolidated2017

$’0002016

$’000

(Loss)/profitbeforeincometaxbenefitincludesthefollowingspecificexpenses:

Salesandmarketingexpenses

Advertising 1,142 1,453

Salesandmarketingrelated–Wages,commissionsandon-cost 4,354 2,138

Seminarsandsponsorships 901 843

6,397 4,434

Generalandadministrativeexpenses

Accountingandsecretarialexpenses 98 49

Amortisationexpenses 2,225 1,392

Auditfees 142 36

Baddebtexpenses 101 178

Bankcharges 28 22

Bookkeepingexpenses 19 84

Depreciationexpenses 187 91

Directors’fees 835 772

Employmentexpenses 1,927 1,117

IPO-relatedcosts 1,635 –

Rentalexpenses 553 428

Subcontractors 108 35

Subscriptions 235 130

TelephoneandInternetexpenses 205 105

Travellingexpenses 734 694

Otherexpenses 999 794

10,031 5,927

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Note 6. Income tax benefit

Consolidated2017

$’0002016

$’000

Incometaxbenefit

Currenttax 422 505

Deferredtax–originationandreversaloftemporarydifferences 630 (37)

Aggregate income tax benefit 1,052 468

Incometaxbenefitisattributableto:

Lossfromcontinuingoperations 978 275

Lossfromdiscontinuedoperations 74 193

Aggregate income tax benefit 1,052 468

Deferredtaxincludedinincometaxexpensecomprises:

Increaseindeferredtaxassets/(increaseindeferredtaxliabilities)(note18) 630 (37)

Deferredtax–originationandreversaloftemporarydifferences 630 (37)

Numericalreconciliationofincometaxbenefitandtaxatthestatutoryrate

(Loss)/profitbeforeincometaxbenefitfromcontinuingoperations (1,725) 262

Lossbeforeincometaxbenefitfromdiscontinuedoperations (247) (643)

Lossbeforeincometaxbenefit (1,972) (381)

Taxatthestatutorytaxrateof30% 592 114

Taxeffectamountswhichare(notdeductible)/taxableincalculatingtaxableincome:

Effectofexpensesthatarenotdeductibleindeterminingtaxableprofit (1,070) (643)

Effectoftaxconcession(ResearchandDevelopmentTaxIncentives) 900 996

422 467

Adjustmentrecognisedforpriorperiods – 38

Income tax benefit 1,052 468

Note 7. Discontinued operationsTheCompanycompletedthewinddownofitsRegisteredTrainingOrganisation(RTO)divisionon13January2017.Thedivisionhasbeendisclosedasadiscontinuedoperation.

Results of discontinued operations

Consolidated2017

$’0002016

$’000

Revenuefromrenderingofservices(2017:refundtocustomers) (10) 423

Costofsales (101) (354)

(Grossloss)/grossprofit (111) 69

Salesandmarketingexpenses (35) (489)

Generalandadministrativeexpenses (101) (223)

Operatinglossfromdiscontinuedoperation (247) (643)

Incometaxbenefit 74 193

Lossafterincometaxbenefitfromdiscontinuedoperations (173) (450)

Thelossafterincometaxbenefitfromthediscontinuedoperationof$173,193(2016:lossof$450,024)isattributableentirelytotheownersoftheCompany.

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Note 8. Current assets – cash and cash equivalents

Consolidated2017

$’0002016

$’000

Cashatbank 26,601 3,017

Note 9. Current assets – trade and other receivables

Consolidated2017

$’0002016

$’000

Tradereceivables 4,402 3,013

Allowancefordoubtfuldebts (914) (851)

3,488 2,162

Otherreceivables 80 65

3,568 2,227

Impairment of receivablesTheconsolidatedentityhasrecognisedalossof$101,816(2016:$177,797)inprofitorlossinrespectofimpairmentofreceivablesfortheyearended30June2017.

Theageingoftheimpairedreceivablesprovidedforaboveareasfollows:

Consolidated2017

$’0002016

$’000

0to3monthsoverdue 515 684

3to6monthsoverdue 399 167

914 851

Movementsintheprovisionforimpairmentofreceivablesareasfollows:

Consolidated2017

$’0002016

$’000

Openingbalance 851 14

Additionalnetprovisionsrecognised 63 837

Closingbalance 914 851

Note 10. Current assets – income tax and R&D refundable

Consolidated2017

$’0002016

$’000

IncometaxandR&Dtaxincentiverefundable 503 536

ThecompanyexpectstheR&Dtaxincentiverelatedtothefinancialyear2017willbeavailabletothecompany.Further,thecompanyintendstosubmitthe2017R&Dtaxincentiveapplicationandhasrecordedthoseamountsinthefinancialstatementsfortheyearended30June2017althoughthecompanywilllodgetheR&DtaxincentiveapplicationtotheAusIndustryafter30June2017.Anestimateofthe2017R&DcreditshavebeenincludedasitisexpectedthatthecompanywillreceivetheseinlinewithpreviousclaimsmadewithAusIndustry.F

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Note 11. Current assets – other

Consolidated2017

$’0002016

$’000

Prepayments 259 179

Otherdebtors 113 65

372 244

Note 12. Non-current assets – property, plant and equipment

Consolidated2017

$’0002016

$’000

Plantandequipment–atcost 396 253

Less:Accumulateddepreciation (243) (202)

153 51

Computerequipment–atcost 606 536


170 215

Leaseholdimprovements–atcost 233 138


183 119

506 385

ReconciliationsReconciliationsofthewrittendownvaluesatthebeginningandendofthecurrentandpreviousfinancialyeararesetoutbelow:

Consolidated

Plant and equipment

$’000

Computer equipment

$’000

Leasehold improvements

$’000Total

$’000

Balanceat1July2015 62 118 45 225

Additions 10 159 82 251

Depreciationexpense (21) (62) (8) (91)

Balanceat30June2016 51 215 119 385

Additions 143 70 95 308

Depreciationexpense (41) (115) (31) (187)

Balanceat30June2017 153 170 183 506

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Note 13. Non-current assets – intangibles

Consolidated2017

$’0002016

$’000

Softwaredevelopmentcosts 6,293 4,069

Less:Accumulatedamortisation (3,521) (1,828)

2,772 2,241

Capitalisedsalescommissioncosts 1,692 1,153

Less:Accumulatedamortisation (930) (443)

762 710

Customerlist(acquiredthroughbusinesscombinations) 410 –

Less:Accumulatedamortisation (44) –

366 –

Goodwill(acquiredthroughbusinesscombinations) 2,071 –

5,971 2,951

ReconciliationsReconciliationsofthewrittendownvaluesatthebeginningandendofthecurrentandpreviousfinancialyeararesetoutbelow:

Consolidated

Software development

costs $’000

Capitalised commission

costs $’000

Customer list $’000

Goodwill $’000

Total $’000

Balanceat1July2015 1,677 407 – – 2,084

Additions 1,663 596 – – 2,259

Amortisationexpense (1,099) (293) – – (1,392)

Balanceat30June2016 2,241 710 – – 2,951

Additions 2,225 539 – – 2,764

Additionsthroughbusinesscombinations(note15) – – 410 2,071 2,481

Amortisationexpense (1,694) (487) (44) – (2,225)

Balanceat30June2017 2,772 762 366 2,071 5,971

GoodwillisacquiredthroughtheacquisitionofTechniWorksPtyLimited,pleaserefertoNote15forfurtherdetails.

Animpairmentloss,ifany,isrecognisedfortheamountbywhichthecarryingamountexceedsitsrecoverableamount.TherecoverableamountisdeterminedonaFairValueLessCosttoSellandasat30June2017therearenoindicatorstosuggestthatanimpairmentwouldoccur.

Note 14. Current liabilities – trade and other payables

Consolidated2017

$’0002016

$’000

Tradepayablesandaccruals 2,390 614

Otherpayables 599 807

Loansfromarelatedparty 25 25

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Note 15. Business combinationsOn7October2016,ElmoSoftwareLtdacquired100%oftheordinarysharesofTechniWorksPtyLtdanditscontrolledsubsidiary,TechniWorksActionLearningPtyLtdforthetotalconsiderationtransferredof$2,062,360.

TechniWorksisanAustralianeLearningcompanyspecialisingintheprovisionofAustralianfocusedcloudbasedeLearningcourses.ThestrategicrationaleunderpinningtheacquisitionofTechniWorksandresultingingoodwillonacquisitionincluded:

– Marginexpansionfromsynergycostsavingsasaresultofasignificantreductioninoperationalcosts;

– LowintegrationriskandabilitytoextractsignificantoperationalefficienciesfromleveragingELMO’sexistinginfrastructure;

– Increasingmarketsharewithanenlargedcustomerbaseof82additionalcustomer.ThisallowsELMOaccountmanagerstoleverageexistingTechniWorkscustomerrelationshipstoestablishnewcontractsfromupsellingandcross-sellingofELMO’sfullsuiteoftalentmanagementsoftwaresolutions;and

– ExpandingELMO’slearningmoduleplatformwiththeadditionofneweLearningcourses.

Detailsoftheacquisitionareasfollows:

Fair value $’000

Plantandequipment 22

Customerlistintangible 410

Otherassets 147

Deferredtaxliability (123)

Deferredrevenue (465)

Netidentifiableliabilitiesacquired (9)

Goodwillonacquisition 2,071

Acquisition-datefairvalueofthetotalconsiderationtransferred 2,062

Ofthetotalconsideration,$1,062,360waspaidincashand$1,000,000isshownasaBusinessCombinationliabilitywithincurrentliabilities.

Thebusinesscombinationliabilityisbasedonthedirectors’bestestimateofTechniWorksrevenuesduringthecontractualearnoutperiodofoneyearfromtheacquisitiondate.

Note 16. Current liabilities – employee benefits

Consolidated2017

$’0002016

$’000

Employeebenefits 654 454

Amounts not expected to be settled within the next 12 monthsThecurrentprovisionforemployeebenefitsincludesallunconditionalentitlementswhereemployeeshavecompletedtherequiredperiodofserviceandalsothosewhereemployeesareentitledtopro-ratapaymentsincertaincircumstances.Theentireamountispresentedascurrent,sincetheconsolidatedentitydoesnothaveanunconditionalrighttodefersettlement.

Note 17. Current liabilities – revenue received in advance

Consolidated2017

$’0002016

$’000

Revenuereceivedinadvance 9,072 6,966

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Note 18. Non-current assets/liabilities – deferred tax

As at 1 July 2016

Recognised in profit or loss

(Note 6)

Acquired in business

combinations (Note 15)

As at 30 June 2017

Shareissueexpenses 27 (7) – 20

Provisionfordoubtfuldebts 58 77 – 135

Prepayments 9 (9) – –

Property,plantandequipment 37 (3) – 34

Intangibles (885) (175) – (1,060)

Blackholeexpenses–IPOcosts – 738 – 738

Customerlist – – (123) (123)

Less:Accumulateddepreciation–Customerlist – 13 – 13

Superannuationpayables 54 17 – 71

Accruals 122 (82) – 40

Provisionforemployeebenefits 170 61 – 231

Deferredtaxasset/(deferredtaxliability) (408) 630 (123) 99

Note 19. Non-current liabilities – employee benefits

Consolidated2017

$’0002016

$’000

Employeebenefits 115 114

Note 20. Financial risk management

Credit risk Creditriskistheriskoffinanciallosstotheconsolidatedentityifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations.

Themaximumexposuretocreditriskatbalancedatetorecognisedfinancialassetsisthecarryingamountofthecustomeroutstandingbalanceslessanyprovisionforimpairmentofthoseassets,asdisclosedintheConsolidatedstatementoffinancialposition.Thesepredominantlyrelatetotradereceivables(seenote9).

Liquidity riskLiquidityriskistheriskthattheconsolidatedentitywillencounterdifficultyinmeetingtheobligationsassociatedwithitsfinancialliabilitiesthataresettledbycashorotherfinancialasset.Theconsolidatedentity’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillhavesufficientliquiditytomeetitsliabilitieswhentheyaredue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheconsolidatedentity’sreputation.

Market risk: Currency risk ELMO’sfinancialstatementsarepresentedinAustralianDollarswithonlyasmallproportionofsalesdenominatedinoverseascurrenciesasdenotedundernote3Revenuefromrenderingofservices.Atthecurrenttimethereforetheriskduetoforeignexchangemovementsisdeterminedtobeimmaterial;howeverthisriskwillcontinuetobeassessedinfutureyears.

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Note 21. Equity – issued capital

Consolidated Consolidated2017

Shares2016

Shares2017

$’0002016

$’000

Ordinaryshares–fullypaid 54,171,584 40 25,110 350

Movements in ordinary share capital

Details Note Date Shares F class shares Issue price $’000

Openingbalance 1July2016 40 – – 350

Sharessubdivision 1 20September2016 910 – – –

Fclassissued 40 $30,000 1,200

Fclassconvertedtoordinaryshares 40 (40) – –

BalancepresharesplitandIPO 990 – 1,550

SharesplitunderIPO 2 5June2017 41,648,834 – – –

IssueofsharestothepubliconIPO 22June2017 12,500,000 – $2.00 25,000

Less:CapitalisedIPOcosts 22June2017 – – – (1,485)

Issueofemployeesgiftshares 22June2017 22,750 – $2.00 45

Balance 30June2017 54,171,584 25,110

Note1.TheCompanyundertooka23.75for1sharesplitofitsordinaryshares.Note2.Theexisting990sharesatthistimeweresplitonaratioof42,069.53.

Ordinary sharesOrdinarysharesentitletheholdertoparticipateindividendsandtheproceedsonthewindingupofthecompanyinproportiontothenumberofandamountspaidonthesharesheld.Thefullypaidordinaryshareshavenoparvalueandthecompanydoesnothavealimitedamountofauthorisedcapital.

Onashowofhandseverymemberpresentatameetinginpersonorbyproxyshallhaveonevoteanduponapolleachshareshallhaveonevote.

Share buy-backThereisnocurrenton-marketsharebuy-back.

Capital risk managementTheconsolidatedentity’sobjectiveswhenmanagingcapitalistosafeguarditsabilitytocontinueasagoingconcern,sothatitcanprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimumcapitalstructuretoreducethecostofcapital.

Capitalisregardedastotalequity,asrecognisedinthestatementoffinancialposition,plusnetdebt.Netdebtiscalculatedastotalborrowingslesscashandcashequivalents.

Inordertomaintainoradjustthecapitalstructure,theconsolidatedentitymayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholders,issuenewsharesorsellassetstoreducedebt.

Theconsolidatedentitywouldlooktoraisecapitalwhenanopportunitytoinvestinabusinessorcompanywasseenasvalueaddingrelativetothecurrentcompany’ssharepriceatthetimeoftheinvestment.

Theconsolidatedentityissubjecttocertainfinancingarrangementscovenantsandmeetingtheseisgivenpriorityinallcapitalriskmanagementdecisions.Therehavebeennoeventsofdefaultonthefinancingarrangementsduringthefinancialyear.

Thecapitalriskmanagementpolicyremainsunchangedfromthe30June2016AnnualReport.

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Note 22. Equity – accumulated losses

Consolidated2017

$’0002016

$’000

Accumulatedlossesatthebeginningofthefinancialyear (378) (465)

(Loss)/profitafterincometaxbenefitfortheyear (920) 87

Accumulatedlossesattheendofthefinancialyear (1,298) (378)

Note 23. Equity – dividendsTherewerenodividendspaidorproposedfortheyearended30June2017(2016$nil).

Note 24. Equity – reserves

Consolidated2017

$’0002016

$’000

Foreignexchangetranslationreserve (47) –

(47) –

Note 25. Key management personnel disclosures

CompensationTheaggregatecompensationmadetodirectorsandkeymanagementpersonneloftheconsolidatedentityissetoutbelow:

Consolidated2017

$’0002016

$’000

Short-termemployeebenefits 1,946 1,634

Post-employmentbenefits 104 –

Long-termbenefits – 50

2,050 1,684

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Note 26. Remuneration of auditorsDuringthefinancialyearthefollowingfeeswerepaidorpayableforservicesprovidedbyDeloitteToucheTohmatsu,theauditorofthecompany,itsnetworkfirmsandunrelatedfirms:

Consolidated2017

$2016

$

Auditservices–DeloitteToucheTohmatsu

Auditofthefinancialstatements 148,000 –

Otherservices–DeloitteToucheTohmatsu 325,000 –

473,000 –

Auditservices–UHYHainesNorton

Auditofthefinancialstatements 75,000 30,000

Otherservices–UHYHainesNorton

Assistanceinpreparationoffinancialstatements,taxreturnandotherconsultancyservices 96,000 35,000

171,000 65,000

DuringthefinancialsyearthefollowingfeesarepayableforservicesprovidedbyMann&AssociatesPAC,theaccountantsandauditorsoftheElmoTalentManagementSoftwarePteLimited:

Auditservices–unrelatedfirms

AuditofthefinancialstatementsforElmoTalentManagementSoftwarePteLimited 3,000 6,000

Otherservices

AccountancyfeesforElmoTalentManagementSoftwarePteLimited 9,000 14,000

12,000 20,000

Note 27. Commitments

Consolidated2017

$’0002016

$’000

Leasecommitments–operating

Committedatthereportingdatebutnotrecognisedasliabilities,payable:

Withinoneyear 530 220

Onetofiveyears 571 31

1,101 251

Operatingleasecommitmentsincludescontractedamountsforvariousretailoutlets,warehouses,officesandplantandequipmentundernon-cancellableoperatingleasesexpiringwithinonetotenyearswith,insomecases,optionstoextend.Theleaseshavevariousescalationclauses.Onrenewal,thetermsoftheleasesarerenegotiated.

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Note 28. Related party transactions

Parent entityElmoSoftwareLimitedistheparententity.

SubsidiariesInterestsinsubsidiariesaresetoutinnote30.

Key management personnelDisclosuresrelatingtokeymanagementpersonnelaresetoutinnote25andtheremunerationreportincludedinthedirectors’report.

Loans to/from related partiesTherewerenoloanstoorfromrelatedpartiesatthecurrentreportingdate.TheCompanyhadaloanpayableof$24,564withoneofitsshareholdersinthe2017and2016financialyear.

Other related party transactions

Transactions during the year ended 30 June Balance as at 30 June

2017 $’000

2016 $’000

2017 $’000

2016 $’000

ElmoTalentManagementSoftwarePteLimited 45 74 623 578

TechniworksActionLearningPtyLimited 479 – 479 –

ElmoSoftwareLimited 198 – 198 –

Duringtheyearanamountof$134,642waswrittenofffromthereceivableduefromtheSingaporesubsidiary,ElmoTalentManagementSoftwarePteLimited.Alltransactionsandoutstandingbalancesareonanarm’slengthbasisandunsecuredbasis.

Terms and conditionsAlltransactionsweremadeonnormalcommercialtermsandconditionsandatmarketrates.

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Note 29. Parent entity informationSetoutbelowisthesupplementaryinformationabouttheparententity.

Statement of profit or loss and other comprehensive income

Parent2017

$’0002016

$’000

(Loss)/profitafterincometaxbenefit (927) 143

Totalcomprehensive(loss)/income (927) 143

Statement of financial position

Parent2017

$’0002016

$’000

Totalcurrentassets 30,317 5,983

Totalassets 37,911 9,938

Totalcurrentliabilities 13,412 8,865

Totalliabilities 13,527 9,387

Equity

Issuedcapital 25,110 350

(Accumulatedlosses)/retainedprofits (726) 201

Totalequity 24,384 551

Contingent liabilitiesTheparententityhadnocontingentliabilitiesasat30June2017and30June2016.

Capital commitments – Property, plant and equipmentTheparententityhadnocapitalcommitmentsforproperty,plantandequipmentasat30June2017and30June2016.

Significant accounting policiesTheaccountingpoliciesoftheparententityareconsistentwiththoseoftheconsolidatedentity,asdisclosedinnote1,exceptforthefollowing:

– Investmentsinsubsidiariesareaccountedforatcost,lessanyimpairment,intheparententity.

– Dividendsreceivedfromsubsidiariesarerecognisedasotherincomebytheparententityanditsreceiptmaybeanindicatorofanimpairmentoftheinvestment.

Note 30. Interests in subsidiariesTheconsolidatedfinancialstatementsincorporatetheassets,liabilitiesandresultsofthefollowingwholly-ownedsubsidiariesinaccordancewiththeaccountingpolicydescribedinNote1:

Ownership interestName Principal place of business/Country of incorporation 2017 % 2016 %

ElmoTalentManagementSoftwarePteLimited Singapore 100.00% 100.00%

ElmoaccreditedPtyLimited Australia 100.00% 100.00%

ElmoTalentManagementSoftwarePtyLimited Australia 100.00% 100.00%

InternationalCollegesPtyLimited Australia 100.00% 100.00%

StudywellCollegePtyLimited Australia 100.00% 100.00%

TechniWorksPtyLimited Australia 100.00% –

TechniworksActionLearningPtyLimited Australia 100.00% –

ElmoSoftwareLimited NewZealand 100.00% –

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Note 31. Events after the reporting periodThereisnoothermatterorcircumstancehasarisensince30June2017thathassignificantlyaffected,ormaysignificantlyaffecttheconsolidatedentity’soperations,theresultsofthoseoperations,ortheconsolidatedentity’sstateofaffairsinfuturefinancialyears.

Note 32. Reconciliation of profit after income tax to net cash from operating activities

Consolidated2017

$’0002016

$’000

(Loss)/profitafterincometaxbenefitfortheyear (920) 87

Adjustmentsfor:

Baddebtexpense 101 178

Depreciationandamortisation 2,412 1,483

(Foreignexchangegain)/foreignexchangeloss (47) 30

IPOcosts 1,635 –

Othercosts (11) –

Interestreceived (31) (49)

Changeinoperatingassetsandliabilities:

Increaseintradeandotherreceivables (1,442) (67)

(Increase)/decreaseinotherassets (128) 102

Increaseinintangibles (424) –

Decreaseinincometaxrefundable 33 200

(Decrease)/increaseindeferredtaxliabilities (507) 37

Increaseintradeandotherpayables 577 252

Increaseinemployeebenefits 201 154

Increaseinrevenuereceivedinadvance 2,106 882

Netcashfromoperatingactivities 3,555 3,289

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Note 33. Earnings per share

Consolidated2017

$’0002016

$’000

Earningspershareforprofitfromcontinuingoperations

(Loss)/profitafterincometax (747) 537

Cents Cents

Basicearningspershare (1.79) 1.34

Dilutedearningspershare (1.79) 1.34

Consolidated2017

$’0002016

$’000

Earningspershareforprofitfromdiscontinuedoperations

Lossafterincometax (173) (450)

Cents Cents

Basicearningspershare (0.41) (1.13)

Dilutedearningspershare (0.41) (1.13)

Number Number

Weightedaveragenumberofordinarysharesusedincalculatingbasicearningspershare 41,699,592 39,966,054

Adjustmentsforcalculationofdilutedearningspershare:

Optionsoverordinaryshares – –

Weightedaveragenumberofordinarysharesusedincalculatingdilutedearningspershare 41,699,592 39,966,054

Theweightedaveragenumberofordinarysharesusedincalculatingtheearningspersharefor2016hasbeenamendedtoreflectthesharesplitasdetailedinnote21.

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Directors’ declaration30 June 2017

Inthedirectors’opinion:

– theattachedfinancialstatementsandnotescomplywiththeCorporationsAct2001,theAccountingStandards,theCorporationsRegulations2001andothermandatoryprofessionalreportingrequirements;

– theattachedfinancialstatementsandnotescomplywithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoardasdescribedinNote1tothefinancialstatements;

– theattachedfinancialstatementsandnotesgiveatrueandfairviewoftheconsolidatedentity’sfinancialpositionasat30June2017andofitsperformanceforthefinancialyearendedonthatdate;

– therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable;and

Thedirectorshavebeengiventhedeclarationsrequiredbysection295AoftheCorporationsAct2001.

Signedinaccordancewitharesolutionofdirectorsmadepursuanttosection295(5)(a)oftheCorporationsAct2001.

On behalf of the directors

Danny Lessem Trevor LonsteinDirector Director

30August2017Sydney

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Independent auditor’s reportto the members of Elmo Software Limited

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

46

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 2017, 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) Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial

performance for the year then ended; and (ii) Complying with Australian 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.

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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 Matter How the scope of our audit responded to

the Key Audit Matter Revenue Recognition – rendering of services ($16.6m) Refer to the description of accounting principles and Note 3. For the year ended 30 June 2017, $16.6 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 complying with applicable accounting standards relevant to revenue recognition. This judgment along with the manual nature of the calculations, could affect the timing and quantum of revenue recognized in each period.

Our audit procedures included, but were not limited to: • Obtaining an understanding of 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 applicable accounting standards;

• Assessing the key controls in relation to the

recognition and measurement of revenue; • 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

at 30 June 2017 using the invoice amortisation schedule, noting any exceptions.

We also assessed the appropriateness of the disclosures in note 3 to the financial statements.

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Recoverability of Trade Receivables Refer to the description of accounting policies and Note 9. As at 30 June 2017 the Group’s trade receivables total $4.4 million. The Group has a customer base of 524 customers, deployed across a wide range of industries, most of which are small and medium sized businesses, which makes the assessment of impairment of trade receivables inherently difficult to track. Significant judgment is exercised by management in determining whether a provision should be recognized.

Our audit procedures included, but were not limited to: • Assessing the design and effectiveness of

the key controls in relation to trade receivables approval process and aging of overdue trade receivable balances;

• Evaluating management’s billing process in

relation to automatic renewal/rollover of client subscription contracts and assessing the recoverability of outstanding receivables and whether any of these were cancelled/reversed/credit noted or written off post year end;

• Testing on a sample basis trade receivables

to subsequent cash collections and customer contracts; and

• Evaluating the adequacy of the provisions

recorded against trade receivable balances after factoring subsequent cash received and assessing all outstanding debtor balances over 60 days for recoverability.

We also assess the appropriateness of the disclosures in note 9 to the financial statements.

Software development costs – Research & development Refer to the description of the accounting policies and Note 13. As at 30 June 2017 the Group recognised $2.8 million relating to software development costs. The Group capitalises internal software development costs if it can demonstrate the technical feasibility of completing the intangible asset, reliably measure the costs attributable to the intangible asset during its development and estimate future economic benefits. Judgment is involved in determining whether the costs are directly attributable to develop the Group’s product suite and new software and the appropriateness of the costs to be capitalised.

Our audit procedures included, but were not limited to: • Assessing whether the technical and

commercial feasibility of the product has been achieved;

• Testing the amortisation charge for the

year in accordance with the Group’s accounting policy and the applicable accounting standards;

• Assessing the nature of the services

performed by the employees and challenged/considered whether such services were appropriately capitalised as software development costs;

• Reconciling capitalised hours to internal

timesheets and assessed the distinction between the research and development stages;

• Assessing the reasonableness of the

percentage used by the Group for capitalisation of internal software development costs in relation to the Group’s accounting policy.


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Business combinations Refer to Note 15. The Group on 7 October 2016 acquired 100% of the ordinary shares of Techni Works Pty Ltd and its controlled subsidiary, Techni Works Action Learning Pty Ltd for a total consideration of $2.1 million. The accounting for a business combination can be complex and involves a number of significant judgments and estimates including: The determination of the fair value of the contingent

consideration; and The identification and measurement of the fair value

of the identifiable assets and liabilities acquired including the valuation of customer relationships and goodwill.

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 value of separately identified intangible assets. This primarily included consideration of the reasonableness of revenue growth assumptions and discount rates underlying the valuation of the separately identifiable customer list intangible;

• Assessing the useful economic life of the

customer list intangible acquired; and • Confirming the estimation of the

contingent consideration was in accordance with the sale and purchase agreement terms and conditions and challenging the key assumptions such as revenue growth rates used in the forecasts;


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. 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.

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Responsibilities of the Directors for the Financial Report The directors of the Entity 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 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.

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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 7 to 10 of the Directors' Report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Elmo Software Limited, for the year ended 30 June 2017, 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, Chartered Accountants Sydney, 30 August 2017

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Shareholder informationAs at 11 September 2017

ShareholderInformationrequiredbytheAustralianSecuritiesExchangeLimited(ASX)ListingRulesandnotdisclosedelsewhereintheReportissetoutbelow.

1. Inaccordancewiththe3rdeditionASXCorporateGovernanceCouncil’sPrinciplesandRecommendations,the2017CorporateGovernanceStatement,asapprovedbytheBoard,isavailableontheCompany’swebsiteat:http://investors.elmotalent.com.au/Investors/?page=Corporate-Governance.TheCorporateGovernanceStatementsetsouttheextenttowhichELMOSoftwareLimitedhasfollowedtheASXCorporateGovernanceCouncil’s29Recommendationsduringthe2017financialyear.

2. Substantial shareholders Thenumberofsecuritiesheldbysubstantialshareholdersandtheirassociatesaresetoutbelow:

Fully paid Ordinary Shares

Name Number %

JLABInvestments(No.2)PtyLimited 15,986,422 29.51

LessemTradingPtyLtd 11,989,816 22.13

BessieGarberandManuelGarberastrusteesoftheGarberFamilyTrust 11,989,816 22.13

3. Number of security holders and securities on issue ELMOSoftwareLimitedhasissuedthefollowingsecurities:54,171,584fullypaidordinarysharesheldby536shareholders.

4. Voting rights Ordinary shares InaccordancewiththeEMLOSoftwareLimitedConstitutionandsubjecttoanyrightsorrestrictionsattachedtoanyclassofshares,atameetingofmembers:

– onashowofhands,eachshareholderhas1vote;and

– onapoll,eachfullypaidshareheldbyashareholderhas1vote.

5. Distribution of security holders (a) Quoted securities

Fully paid Ordinary shares Category Holders Shares %

1–1,000 105 42,482 0.08

1,001–5,000 199 633,391 1.17

5,001–10,000 96 774,190 1.43

10,001–100,000 117 2,740,171 5.06

100,001andover 19 49,981,350 92.26

Total 536 54,171,584 100.00

ELMOSoftwareLimiteddoesnothaveanyunquotedsecurities.

6. Unmarketable parcel of shares ThenumberofshareholdersholdinglessthanamarketableparcelofordinarysharesisNil(0)basedonELMOSoftwareLimited’sclosingsharepriceof$2.54,on11September2017.

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Shareholder informationAs at 11 September 2017

7. Twenty largest shareholders of quoted equity securities Fully paid ordinary shares Detailsofthe20largestshareholdersbyregisteredshareholdingare:

Name No. of shares %

1 JLABINVESTMENTS(NO.2)PTYLTD 15,986,422 29.51

2 LESSEMTRADINGPTYLTD 11,989,816 22.13

3. MANUELGARBER&BESSIEGARBER 11,989,816 22.13

4 NATIONALNOMINEESLIMITED 2,670,191 4.93

5 JPMORGANNOMINEESAUSTRALIALIMITED 1,800,000 3.32

6 BNPPARIBASNOMSPTYLTD 1,250,000 2.31

7 ONEMANAGEDINVESTMENTFUNDSLIMITED 900,000 1.66

8 GORDONSTARKEY 510,945 0.94

9 MRDARRYLJUSTINGARBER 460,945 0.85

10 XINSUN 425,695 0.79

11 TREVORLONSTEIN 420,695 0.78

12 WASHINGTONHSOULPATTINSONANDCOMPANYLIMITED 350,000 0.65

13 HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED 350,000 0.65

14 TRUEBELLCAPITALPTYLTD 195,000 0.36

15 CITICORPNOMINEESPTYLIMITED 181,984 0.34

16 WILFERSDEVELOPMENTSPTYLTD 160,306 0.30

17 ROBERTLESSEM 125,000 0.23

18 PETCOLNOMINEESPTYLIMITED 109,240 0.20

19 HHRYAN(NOMINEES)PTYLIMITED 105,295 0.19

20 RAPAKIPTYLTD 86,654 0.16

Total 50,068,004 92.42

Total on Register 54,171,584 100.00

8. NameoftheCompanySecretary: AnnaSandham.

9. ThedetailsoftheCompany’sregisteredofficeare:

Address: Level12,680GeorgeStreet,SydneyNSW2000. Telephone: 0282807355

ThedetailsoftheCompany’sprincipaladministrativeofficeare:

Address: WestfieldTowerOne,Suite2502,Level25,520OxfordStreet,BondiJunctionNSW2022

10. Theaddressandtelephonenumberoftheofficeatwhicharegisterofsecuritiesiskept:

LinkMarketServicesLimited Address: Level12,680GeorgeStreet,SydneyNSW2000 Telephone: 0282807288

11. ELMOSoftwareLimitedsecuritiesarenotquotedonanyotherstockexchangesotherthantheASX.

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12. Thenumberandclassofrestrictedsecuritiesorsecuritiessubjecttovoluntaryescrowthatareonissueandthedatethattheescrowperiodendsaresetoutbelow:

Class of Securities No. of shares Escrow period

Fullypaidordinaryshares 774,995 24monthsfromthedateofquotation(ieuntil29June2019)

Fullypaidordinaryshares 812,088 Tobeheldinescrowfor12monthsfrom18November2016.Inaccordancewithsection7.7oftheProspectusdated6June2017,theshareswillthenbeheldinvoluntaryescrowforthedurationoftimeuntiltheendof24monthsfromthedateofquotation(i.e.until29June2019).

EmployeeGiftShares 22,750 22December2017

13. Unquoted securities ELMOSoftwareLimiteddoesnothaveanyunquotedsecurities.

14. Review of operations and activitiesAreviewofELMOSoftwareLimited’soperationsduringtheperiodisprovidedwithintheDirectors’ReportoftheAnnualReport.

15. On market buy-back Thereisnocurrentonmarketbuy-back.

16. Statement regarding use of cash and assets.Duringtheperiodbetween27June2017and30June2017,ELMOSoftwareLimitedhasuseditscashandassetsreadilyconvertibletocashthatithadatthetimeofASXadmissioninawayconsistentwithitsbusinessobjectivessetoutintheprospectusdated6June2017.

17. Details of investments N/A–ELMOSoftwareLimitedisnotaninvestmentcompany.

18. ThefollowingisasummaryofanyissuesofsecuritiesapprovedforthepurposesofItem7ofsection611oftheCorporationsActwhichhavenotyetbeencompleted.

N/A

19. Nosecuritieswerepurchasedon-marketduringthereportingperiod.

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Glossary

Term Meaning

AASB AustralianAccountingStandardsBoard

ASX AustralianSecuritiesExchange

Australian Accounting StandardsAustralianAccountingStandardsandotherauthoritativepronouncementsissuedbytheAustralianAccountingStandardsBoardandUrgentIssuesGroupinterpretations

Australian AccountingStandards Board

TheAASBisanAustralianGovernmentagencyundertheAustralianSecuritiesandInvestmentsCommissionAct2001

Board TheboardofdirectorsoftheCompany

CEO ChiefExecutiveOfficer

CFO ChiefFinancialOfficer

Company ELMOSoftwareLimited

Corporations Act CorporationsAct2001

Customer retention rateCustomerretentioniscalculatedbydividingthenumberofcustomersinthereferenceperiodwhowerecustomersattheendofthepriorperiodbythenumberofcustomersattheendofthepriorperiod

Directors ThedirectorsoftheCompanyfromtimetotime

EBITDA Earningsbeforeinterest,incometax,depreciationandamortisation

ELMO ELMOSoftwareLimited

Free cash flowsEBITDAaftertheremovalofnon-cashitemsinEBITDAsuchasbaddebtsandchangesinworkingcapitallesscapitalisedsoftwaredevelopmentandcommissioncostsandothercapitalexpenditure

FY[XX] Financialyearending[xx]

IPO InitialPublicOffering

Prospectus TheprospectusdatedxissuedaspartoftheIPO

Recurring revenue Recurringrevenueistheportionofacompany’srevenuethatishighlylikelytocontinueinthefuture

Revenue dollar retention rate Percentageofrevenuefromaselectedgroupofcustomersthathasbeenretainedoverafinancialyear

SaaS Software-as-a-Service

Share AfullypaidordinaryshareintheCompany

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Corporate directory

DirectorsJamesMcKerlieDannyLessemDavidHancockTrevorLonstein

Company SecretaryAnnaSandham

Registered officeLevel12680GeorgeStreetSydneyNSW2000Phone:0282807100

Principal place of businessSuite2502Level25WestfieldTowerOne520OxfordStreetBondiJunctionNSW2022Phone:0283054600

Share registerLink Market Services Pty LimitedLevel12680GeorgeStreetSydneyNSW2000Phone:0282807100

AuditorDeloitte Touche TohmatsuGrosvenorPlace225GeorgeStreetSydneyNSW2000

SolicitorsNorton Rose Fulbright AustraliaLevel18GrosvenorPlace225GeorgeStreetSydneyNSW2000

Financial AdviserBlackpeak Capital Pty LtdLevel555HarringtonStreetTheRocksNSW2000

Lead Manager and UnderwriterWilsonsLevel32GovernorMacquarieTower1FarrerPlaceSydneyNSW2000

Stock exchange listingElmoSoftwareLimitedsharesarelistedonthe AustralianSecuritiesExchange(ASXcode:ELO)

Websitewww.elmotalent.com.au

Corporate Governance Statementhttp://investors.elmotalent.com.au/Investors/?page=Corporate-Governance

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Documents

For personal use only - ASX2017/10/18 · FY17 pro forma EBITDA Up 42% on prospectus forecast1 524 Customer base3 Up 11% since 31 December 2016 2.29 Modules per customer Up from 2.22