LiveHire Limited

 
Lower Sales Reliasation Due to Timing Issues in the June Quarter: LiveHire Limited (ASX: LVH) offers talent acquisition and mobility platform which manages the flow of talent, into and through a business, seamless. The company as on 24 July 2019, came up with a market release comprising of its June Quarterly Report, Market Update and Appendix 4C for the period ending 30 June 2019. As per the release, ARR (Annualised Recurring Revenue) witnessed a rise of 88% for the year to $2.53 million and 3% on QoQ basis. The company also mentioned that Channel Partner Strategy in the U.S. is progressing well and one leading SAP systems implementer, Rizing, has been added as a partner to the portfolio.
 
Cash Receipts: The company saw a yoy growth of 56% to $3.1 million for 12-month trailing cash receipts with quarterly cash receipts of $624,000. The balance sheet at the end of the quarter consists of trade debtor amounted to ~$655,000 as compared to $486,000 as at 31 March 2019 and $176,000 as at 30 June 2018. The higher trade debtors can be attributed to the sales achieved near the end of the quarter. Operating cash outflow of $3.6 million during the quarter was on low receipts from customers. The cash balance at the end of the quarter stood at $34 million with zero debt on the balance sheet.
 
Client Wins & Churns: LVH attained twelve client wins in the quarter, out of which, ten was from the new Direct Sales team. Across the six client losses, none were product related. 3 small clients represented the active evolution of the LVH portfolio to larger, well-fitted enterprises and 3 clients were unavoidable organisational mandates.
 
TCCs (Talent Community Connections), for the quarter, grew by ~191,000 reaching to ~1,110,100. It indicates the size of the networked ecosystem of candidates with unified profiles across private Talent Communities.
 
The new Direct Sales team, started in the month of March, created a distinct pipeline for growth. The team delivered more than $320,000, comprising of $240,000 ARR and $80,000 non-recurring during the quarter. Out of this, $275,000 were attained late in the quarter, which demonstrated forward momentum.
 
 

Key business metrics for the Quarter Ended June 2019 (Source: Company Reports)
 
Recent Update:

• The company recently, announced that as per the Employee Incentive Plan (EIP) of LVH, it will undertake an employee share scheme buy-back of 6,966,390 ordinary shares which will be pursuant to loan-back arrangements under the EIP (Buy Back Shares). On completion of the buy-back, the Buy Back Shares will be cancelled, resulting in a rise in the interest (by 2.35% of their original percentage interest), each shareholder holds in the total number of LVH shares on issue by 2.35%. The share buy-back followed by the share cancellation will be implemented on 8 August 2019.
• The company recently announced that Regal Funds Management Pty Ltd (RFM) has become its substantial shareholder with the voting rights of 5.01%.

 
Outlook & Stock Recommendation: The company delivered modest growth in the June quarter, however, direct sales team indicated securing real traction with 10 new logos being added during the period. Partner contribution from Australia was lower than in the past with experiencing some churns, partially offset by direct team wins. With three critical foundation elements –(a) U.S. entry which is gaining traction (b) Channel Partner Strategy with main focus on a broad portfolio of partners in both Australia and the U.S., and (c) Accelerating wins from the Direct Sales team in Australia. Going forward, LVH will continue to proactively manage the expenditure, with incremental spend expected in the U.S. and through partner commissions.
 
Looking at the historical price performance, the stock has given negative returns of 33.93% and 34.51% over the period of 6-months and YTD, respectively. Currently, the stock is trading at close to a 52-week low level of $0.300. Hence, considering the quarterly performance, net cash outflow position, ARR, business growth in the U.S. & Australia, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $0.375 per share, up 1.351% as on 25 July 2019. 

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