Software company Livetiles Ltd (ASX: LVT) has surged 10.2% to 48.5 cents in lunchtime trade following an announcement that it has surpassed $10 million in ASR (Annualised Subscription Revenue) and has entered into a strategic partnership with Microsoft vendor N3.
LiveTiles allows users of its software to create their own intelligent workplace experiences. The impressive rate of growth in ASR continues, which has now risen from $6.9 million at the end of December 2017 to over $10 million.
The strategic relationship with N3 consists of a sales & marketing execution agreement and a software licensing agreement. N3 is an outsourced sales and marketing execution vendor for Microsoft's Azure and Dynamics platforms which also services other global clients such as SAP, IBM and Cisco.
LiveTiles will pay N3 approximately US$800,000 per month from April 2018 after adjusting for expected government grant funding to provide outsourced sales and execution services.
The partnership offers the company the flexibility to modify the scale of N3's sales to reflect market demand. N3 has been crucial in driving substantial revenue growth for Microsoft and Microsoft partners over the last 6 years, via Microsoft's integrated cloud sales strategy. The company's expertise is expected to lead to highly scalable customer and revenue growth for LiveTiles.
The software licensing agreement component consists of LiveTiles licensing its full suite of intelligent workplace software to N3. LiveTiles will receive a software licensing fee of US$225,000 per month that equates to ASR of US$2.7 million (A$3.4 million).
Foolish takeaway
LiveTiles remains one of the more exciting small cap technology plays on the Australian market. Since the end of December 2016, the company's ASR has soared from $2 million to $10 million that has resulted in its stock price rising from 12 cents to 48.5 cents. However, the company still has a way to go before achieving profitability after posting a net loss of $5.9 million for the December 2017 half year. It remains in the early stages of growth where cash burn is high as it attempts to achieve scale.
This month, LiveTiles raised $20 million before costs at 45 cents in a placement to institutional investors which was heavily oversubscribed, reflecting the bullishness surrounding the stock. Eligible shareholders will also get an opportunity to participate in a Share Purchase Plan that will be capped at $3 million and closes on 15 March.
