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ASX stock of the day: LiveTiles share price surges 15% following shareholder letter

The Livetiles Ltd (ASX: LVT) share price is up 15% today after the founders issued a shareholder letter. The letter provided a positive update to investors amid the COVID-19 situation. According to the Australian Financial Review, LiveTiles is the fastest-growing technology company in Australia and the fifth-fastest growing company across all industries. 

What does LiveTiles do? 

LiveTiles supplies tools to create dashboards, employee portals, and corporate intranets. Headquartered in New York, LiveTiles has operations across the US, Europe, and Australia. The LiveTiles share price is up more than 116% from its March lows as the increase in remote working promotes interest in its products. 

LifeTiles technology extends to underlying Microsoft platforms such as Office365, Sharepoint, and Azure. The company creates value-adds and enhancements to the underlying platforms that address common business needs and priorities. LiveTiles can be accessed and leveraged by customers through channels such as Microsoft Teams and Internet Explorer. 

What did LiveTiles report?

LiveTiles reported it has a strong medium and long-term outlook. And it added that COVID played a global role in accelerating digital workplace software adoption. Having secured its first paying customer in 2015, LiveTiles now boasts 1,200 enterprise customers and over 1,000 recurring subscription customers. 

Revenue has increased alongside customer numbers. At 31 March 2020, annualised recurring revenue was $55 million. Since inception, LiveTiles has operated as a software-as-a-service (SaaS) business with a recurring subscription model. The implied lifetime value of the recurring revenue pool built by LiveTiles has increased 4.9 times over 2 years. Yet the company believes it has only penetrated a little over 1% of its addressable customer pool. These insights are likely a big reason why the LiveTiles share price jumped so high today.

Impact of COVID

There is no doubt that the increase in remote working due to the coronavirus has pushed interest in digital interaction solutions. The pandemic means solutions like those offered by LiveTiles are moving towards “must-have” status compared to a “nice to have” approach. 

While the longer-term outlook is bright, LiveTiles was aware at the start of the pandemic that the lockdown may reduce its cash runway. It wanted to be unquestionably financially stable during and after the pandemic. The company substantially reduced headcount in order to reduce cash burn. This and other initiatives have resulted in $18 million in annualised cost savings. 

What’s next for LiveTiles? 

LiveTiles vision is to create the world’s foremost intranet software company. Coronavirus has thrown up both opportunities and challenges in the short term. While the global macroeconomic outlook remains highly uncertain, LiveTiles has elected to take a conservative position on cash burn. 

Nonetheless, LiveTiles believes COVID-19 will undoubtedly accelerate market adoption of digital workplace software. A recent survey of the US workforce showed 83% of employees were willing to work remotely compared to 37% pre-COVID-19. The company estimates it has a $15 billion market opportunity which remains in the early stages. It is increasingly optimistic about the external forces shaping its future. 

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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of LIVETILES FPO. 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