Enery One (ASX: EOL) Is Tracking Ahead Of Guidance In H1 2021

This morning, energy trading and risk management software firm Energy One (ASX: EOL) announced that it is tracking ahead of guidance for the half to December 2020. At the time of writing, the Energy One share price has not yet responded to what appears to be good news, and is up less than 1%.

Specifically, the announcement said that:

Previous guidance for full FY21 was Revenue of $25M and EBITDA of $6.5M. The Company now expects revenues for H1 FY21 to be in the order of $13.7M and EBITDA of around $4.1M.

When we initially covered Energy One (ASX: EOL) at a share price of about $2.40, we said that, “Over 70% of Group revenue is recurring in nature with the remainder comprising project related revenue.” This means that a strong first half sets the scene for a potential guidance beat in the full year.

Given that ~30% of revenue still arises from project based implementations, it is still possible for revenue to go down half-on-half. However, the good news is that today’s announcement says eZ-nergy won four new contracts in November, Contigo is winning new accounts, and the Australian business “continues to make progress rolling out the 5MS solutions for the upcoming market change.”

The 5MS solutions comment refers to the decision by AEMO for the entire electricity market to move to a 5 minute pricing model. This is a positive for the Enery One share price because it means that Energy One’s clients have to do a big upgrade.

As a result of all this, one would not necessarily be out of line to predict that Energy One is going to beat its initial guidance for FY 2021. Indeed, it actually seems quite likely.

While that is great news for shareholders like myself, there are still a few reasons to be cautious about the current Energy One share price, after such a strong run.

Overall, today’s announcement is another piece of evidence suggesting Energy One is a good quality software business.

This post is not financial advice, and you should click here to read our detailed disclaimer. 

Disclosure: the author of this piece owns Energy One shares and will not sell any for at least 1 day following the publication of this article.

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