The LiveTiles Ltd (ASX: LVT) share price is racing higher during morning trade.
At the time of writing the intelligent workplace software company’s shares are up 9% to 29 cents.
Why is the LiveTiles share price racing higher?
Investors have been buying the company’s shares following the release of its second quarter update this morning.
That update revealed that after a subdued start to FY 2020, LiveTiles has pushed up a gear in the second quarter.
According to the release, at the end of December LiveTiles’ annualised recurring revenue (ARR) reached $52.7 million. This was a 22.8% increase on the previous quarter and a 130% lift on the prior corresponding period.
Though, it is worth noting that some of its ARR growth in the second quarter came from its acquisition of CYCL.
Excluding the impact of the CYCL acquisition, LiveTiles delivered organic ARR growth of $5.1 million or 11.9% over the previous quarter.
And whilst this organic growth is slower than what the company has been delivering over the last couple of years, this is due to its focus on bundled and integrated offerings. These carry a longer sales cycle but higher average contract value and retention rate.
This focus led to LiveTiles reporting continued growth in average contract value. This growth was achieved despite a higher churn rate among smaller customers and adverse foreign exchange translation impacts.
LiveTiles co-founder and chief executive officer, Karl Redenbach, was pleased with the first half.
He said: “LiveTiles is pleased with its record base of annualised recurring revenue, progress against our strategy and overall market position. We were also thrilled to have the CYCL team join LiveTiles during the quarter. This acquisition consolidated our position as the global market leader in intranet software, targeting a potential total market of $13 billion in its very early stages of adoption.”
Mr Redenbach appears confident on the future and pointed out that the company is only scratching at the surface of its global market opportunity.
“With market penetration of 1% to date we see enormous opportunity to drive both intranet software adoption and extend the value of the intranet,” he added.
As a result, he continues to expect “another year of strong customer and revenue growth in FY20, driven by our continued investment into our products, partners and sales and marketing channels.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended LIVETILES FPO. 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.