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Why this ASX tech share is charging 20% higher today

The LiveTiles Ltd (ASX: LVT) share price is charging 20% higher this morning after the company reported an increase in revenue and customers over the March quarter.  

Annualised recurring revenue is up as companies turn to remote working during the coronavirus crisis. 

LiveTiles is a provider of intranet software. It is assisting over 1,000 customers to support remote employee communications, operating system access, collaboration and document sharing. 

Recurring revenue up

The company reports that annualised recurring revenue reached $55.2 million at 31 March 2020, up from $52.7 million as at 31 December 2019. Annualised recurring revenue has grown 60% in the last year and is up 4.9x in 2 years.

Customer numbers rose from 1,031 at the end of 2019 to 1,068 at 31 March. Average annual recurring revenue per customer was over $51,500 at the end of the March quarter, up 31% on the prior corresponding period. 

Intranet software

LiveTiles software supports intranets, the ‘home page’ of organisations. Intranets are used by employees to access company information, policies, and systems, wherever they are, including when working from home. LiveTiles products can be accessed via internet browsers, apps, or through Microsoft Teams. 

Microsoft Teams is a collaboration platform that combines chat messaging, video meetings, file storage, and application integration. According to Microsoft, Teams was the fastest-growing application in its history prior to the coronavirus outbreak, and growth has accelerated further in recent weeks. 

The rapid growth of Microsoft Teams is creating further growth opportunities for LiveTiles, which has developed a number of products to work with Teams. During the March quarter, Microsoft saw a significant uplift in pipeline and activity around remote working products. LiveTiles has likewise seen strong interest from current and future customers, particularly around its capabilities around Microsoft Teams. 

Coronavirus impacts

LiveTiles is working with a number of government and health organisations globally, including in Australia and the US, to support current operating challenges. Relevant technologies, including Microsoft Teams, are being implemented. 

A number of traditional intranet projects slated for confirmation during March have been paused due to the current substantial upheaval. LiveTiles reports, however, that these projects are still active. New customers added in the March quarter include an Australian federal government department, a global aerospace manufacturer, and a global pharmaceuticals company. 

CEO Karl Redenbach stated, “recent difficult events have thrown into sharp focus for customers the importance of cloud-based tools that can be accessed by all employees anywhere, such as intranets and collaboration software.”

Cash flow and capital 

LiveTiles reports that it is well capitalised with more than $33 million cash on hand as at 31 March. It is accelerating efforts to reach breakeven operating cash flow and is taking tangible steps to reach this point during 2020.

Material cost reductions were implemented in late March and early April, and the company has confirmed it has no requirement to raise further capital to fund operating cash burn. 

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Motley Fool contributor Kate O'Brien 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.

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Kate O'Brien