Intelligent workplace platform Livetiles Ltd (ASX: LVT) impressed the market today after revealing that it has more than tripled ‘annualised recurring revenue’ (ARR) to $34.5 million as at March 31 2019, compared to the prior corresponding period.
The stock is up 4.5% to 58.5 cents as a result of the news and has been on a volatile but upward trajectory over the last 5 years.
In fairness $8 million of the ARR recorded is on a pro forma basis and has come about via the acquisition of Wizdom as at December 31 2018, but it also reported that organic ARR growth of $3.6 million was delivered in the quarter ending March 31 2019.
If you’re a small-cap tech investor organic growth is the number one quality to look for, as if this can be delivered sustainably and faster than costs rise you could be onto a winner.
Zooming out a little it’s apparent that Livetiles continues to divide the bulls and bears on its valuation of $382 million based on 652.7 million shares outstanding as at April 9, 2019.
Compare this to its financials for the six-month period ending December 31 2019 that saw it post a loss of $22.7 million on subscription of revenue of just $5.7 million.
Remember ARR is just a business metrics for forward looking revenue, whereas revenue is generally what has come in the door as cash in the recorded period. Therefore we can see that Livetiles is spending a lot to deliver its ARR growth.
As such it looks a high risk bet on valuation grounds, despite it being a Microsoft partner and forecasting that it will deliver $100 million of ARR by June 2021. The question for investors is whether it will deliver on that forecast and at what cost.
The stock is likely to remain volatile and I don’t know which way it will go, but another business in the software space worth a look also delivering some strong organic growth while partnering with global tech giants is Bigtincan Holdings Ltd (ASX: BTH).
Either of these could be worth some more reading up on…as well as the business below….
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Returns as of 6th October 2020
Tom Richardson has no position in any of the stocks mentioned.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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