Company Overview: LiveTiles Limited is an Australia-based company, which offers digital workplace platforms, including user experience-focused solutions to the enterprise, education and small and midsized business (SMB) markets. The Company is engaged in the development and sale of digital workplace software. The Company's product suite includes LiveTiles SharePoint, LiveTiles Cloud and LiveTiles Mosaic for K-12 schools. LiveTiles SharePoint organizes scattered business applications and designs dashboards and sites on Microsoft SharePoint and Office 365. LiveTiles Cloud organizes scattered business applications and designs dashboards and sites without needing to install software. LiveTiles Mosaic is a virtual classroom where teachers and students connect. The Company's customers represent a diverse range of sectors and are spread throughout North America, the United Kingdom, Europe, the Middle East and Asia-Pacific.
 

LVT Details

Robust Growth in Annualised Recurring Revenues: LiveTiles Limited (ASX: LVT) happens to have a vision which revolves around creating a platform that fosters collaboration as well as empowers users. The company is having a market capitalization of ~$212.17 million as of February 01, 2019. It had earlier released the results for FY 2018 which reflected that the company posted annualized recurring revenues or ARR amounting to $15.0 million which implies the substantial rise of 275% on the YoY basis. The company stated that, at the end of FY 2018, there were 536 paying customers and there was robust growth in the enterprise customers. Moreover, the company witnessed favourable response from the roll out of LiveTiles’ Intelligence AI as well as LiveTiles Bots. In FY 2018, the company witnessed robust growth with regards to the large customers which are giving at least $100,000 of annualized recurring revenue each. At the end of June 30, 2018, the company had twenty-three large customers while at the end of June 30, 2017, there were five. The company’s deployments towards co-marketing initiatives with Microsoft, direct sales personnel as well as growth in the brand awareness have supported in witnessing robust customer growth. LiveTiles Limited stated that they have been witnessing elevated product as well as brand awareness because of the robust endorsement of its products by Microsoft. The company is having an optimistic outlook for FY 2019 with respect to customer and revenue growth because of the deployments towards the initiatives focused on sales and marketing as well as strategic partnership with N3. 
 

Annualised Recurring Revenue (Source: Company Reports)

Decent Margins Building Confidence in Future Performance: LiveTiles Limited has been efficient in maintaining the key margins’ position. The company’s net margin at the end of FY 2018 was -388.1% reflecting an improvement on the YoY basis as in FY 2017 it was -417.9% which reflects strength in the company’s revenues during the same period. The company’s EBITDA margin in FY 2018 stood at -394.1% while in FY 2017 it was -525.6% reflecting an improvement on the YoY basis. This favourable trend will continue and will support to turnaround positive margins in years to come at the back of synergistic investment in sales and marketing, launching new products, strategic partnership with Microsoft. This might act as a tailwind for future growth prospects.

Moreover, the company happens to be in a strong position when it comes to liquidity as reflected by the current ratio of LiveTiles Limited. The company’s current ratio stood at 2.38x in FY 2018 which implies the rise of 37.4% on the YoY basis and its current ratio is also higher than the industry median of 2.03x. This reflects that the company is having a decent liquidity position as compared to the broader industry and it could help LVT in meeting the short-term commitments which might support the long-term growth initiatives. 

Participation in Microsoft P2P Integrated Solutions Program: LiveTiles Limited had recently made an announcement related to the participation with regards to Microsoft P2P Integrated Solutions Program. As a result of this participation, the company would be working with the Microsoft as well as with its other Australian partners like Intelledox, SingleCell and Veritec with the objective of building enterprise solution. The company stated that, by March 2019, the enterprise solution would be publishing in Microsoft’s cloud marketplace i.e. AppSource as well as Azure Marketplace. LiveTiles stated that AppSource, as well as Azure Marketplace, happens to give the platform for the partners of Microsoft so that their core offerings, as well as additional solutions which are developed with the help of other partners, can be promoted.  

LiveTiles stated that Microsoft is deploying towards the platform which would allow the sales teams, partners as well as customers in finding, trying, buying as well as selling the industry solutions. We presume that this participation would be mutually benefitted for both the companies.  

Strong Results Delivered in December 2018 Quarter: Recently, LiveTiles Limited had released an update for the activities related to the December 2018 quarter. The company ended December 2018 quarter by generating the annualized recurring revenue or ARR of $22.9 million which implies a 232% annual increase. The company has witnessed favourable momentum with respect to the customer numbers as it ended December 2018 quarter with 598 paying customers.


Average ARR Per Customer (Source: Company Reports)

The company stated that its average ARR per customer has been witnessing a rise in the quarter ended December 2018 and it rose 145% in the span of last twelve months because of the robust growth with respect to new enterprise customer as well as increased penetration of the existing customers through LVT’s “land and expand” strategy. LiveTiles Limited added that the sales and marketing team of N3 has been generating rapid sales pipeline growth and the conversions have been supporting robust growth in the customer as well as ARR. In the quarter ended December 2018, the company witnessed customer cash receipts amounting to $4.1 million which implies the rise of 69% as compared to September 2018 quarter while compared to prior corresponding quarter it implies the rise of 350%. LiveTiles Limited has witnessed net cash outflow amounting to $9.6 million from the operating activities.
 
 
Customer Cash Receipts (Source: Company Reports)

Roll Out of Airline AI Bot Solution with Microsoft: Recently, the company stated that they have rolled out Airline AI Bot Solution along with the Microsoft. As per the press release, LiveTiles’ Gate Agent Assistant Bot happens to leverage the capabilities of artificial intelligence (or AI) so that automated responses can be provided. However, LiveTiles added that the information which is needed to allow the staff of airline to rapidly respond to the demands of the customer at the gate can also be retrieved. The key personnel of Microsoft had stated that LiveTiles’ Gate Agent Assistant Bots possesses the capability which would streamline as well as drastically make the customer experiences better as it would be improving the efficiency and will also be reducing the delays at the busy airport gates. The key personnel of LiveTiles had stated that there happen to be numerous major commercial airlines which are utilizing the solutions of LVT. LiveTiles’ key personnel added that the new solution would substantially change the way the airlines make up the gate process.

What Might Support LiveTiles Moving Forward: At the end of December 2018 quarter, LiveTiles Limited had a cash balance amounting to $22.5 million. There are expectations that the company might witness gross cash operating expenses amounting to around $11.7 million in the March 2019 quarter which reflects a decline of $13.7 million as compared to December 2018 quarter. Moreover, the company stated that it might witness lesser gross cash operating expenses in the six months to June 30, 2019 as compared to gross cash operating expenses witnessed in six months ended December 2018. This is expected because of the expenses’ normalization associated with sales as well as marketing execution services which are given by N3 in the US after completion of onboarding, recruiting as well as training phase. Also, the cost savings because of numerous non-customers facing reductions in the staff which was implemented in the quarter ended December 2018 would help. In FY 2019, there are expectations that the company would witness robust growth in the revenues on the back of the recent roll out of its AI products, deployments towards sales and marketing, favourable momentum with regards to N3 partnership as well as co-marketing initiatives with Microsoft.

The company’s top management had stated that N3 sales and marketing channel, as well as its unique global Microsoft partnership, have been developing a large pipeline of the sales opportunities. They added that they would be focused on converting the growing as well as a large pipeline into the fresh customers moving forward. 

Stock Recommendation: On the daily chart of LiveTiles Limited, Exponential Moving Average or EMA has been applied and default values were used for the purposes. As per the observation, it was noticed that the stock price has crossed the EMA and is trending in the upward direction. This is the sign of bullish momentum. Therefore, there is an expectation that the company’s stock price might witness an upward momentum.

Moreover, there are expectations that the company would be primarily benefited by its decent standing from the perspective of the margins. Moreover, N3 partnership, as well as deployments in the sales and marketing, would act as the tailwinds for the long-term growth prospects. Talking about the past performance, the company’s stock has delivered the return of -41.09% in the span of previous 6 months and is trading below the average of 52 weeks high and low level of $0.515. Hence considering aforesaid factors and current trading scenario, we give a “Speculative Buy” rating on the stock at the current market price of A$0.390 per share (up 2.632% on February 01, 2019). 

 

LVT Daily Chart (Source: Thomson Reuters)

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