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LiveTiles share price sinks on Q4 update

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The LiveTiles Ltd (ASX: LVT) share price has come under pressure after the release of its fourth quarter update.

In morning trade the software company’s shares are down almost 4% to 26 cents.

How did LiveTiles perform in the fourth quarter?

During the fourth quarter of FY 2020, the intranet and workplace technology software provider delivered another quarter of record annualised recurring revenue (ARR) and cash receipts.

At the end of the period, the company’s ARR had grown to $58.2 million on a constant currency basis. This was an increase of 45% year on year. Whereas on a reported currency basis, ARR reached $53.8 million, representing year on year growth of 34%.

This was driven by a small quarterly increase in customer numbers to 1,092 and a 3% lift in average constant currency ARR per customer to $53,317. On a reported currency basis, its average ARR per customer grew 13% to $49,248.

Customer cash receipts came in at $11.2 million, which represents a third consecutive record quarter. It brought its trailing twelve-month (ttm) cash receipts to $41 million, up 9% quarter on quarter and 114% on the prior year.

LiveTiles finished the quarter with a cash balance of $37.8 million. This represents a rise of $4 million or 12% on third quarter cash levels.

Management advised that this strengthened financial position reflects its substantially improved operating cashflow, which is largely due to lower cash operating expenses to reduce cash burn, growth in customer cash receipts, and the receipt of government R&D refunds.

Management commentary.

LiveTiles’ Co-Founder and Chief Executive Officer, Karl Redenbach, was pleased with the company’s performance during the quarter.

He said: “We are very pleased with our overall Q4 results, particularly the significant step-change we have made on our operating expenditures and cash flow. We were recently named as Australia’s fastest growing technology company, but we’ve had to make some very difficult, deliberate decisions this quarter to balance this growth with sensible cost controls and expenditure.”

“Our team is hugely energised with the opportunity to help customers supporting their employees to communicate and collaborate in the new world of remote and work from home. We passionately believe LiveTiles is well positioned to flourish and as co-founders, shareholders, directors and executives we take a long-term view in building shareholder value,” he added.

Outlook.

While the company hasn’t provided any guidance for FY 2021, it has spoken about the current operating environment.

LiveTiles advised that the pandemic has created a challenging sales environment for enterprise software, which has led to the company seeking to lower its cash burn materially. It is aiming to be operating cash flow breakeven during calendar 2020, subject to market conditions.

It continues to review additional options to reduce cash burn, including short-term revenue and cost initiatives, in order to achieve this target.

Positively, management does believe there are strong medium and long-term tailwinds supporting the adoption of digital workplace software. As a result, there is no change in long-term strategy or market opportunity for LiveTiles.

Management also notes that the company’s pipeline has been building strongly throughout the last quarter through both direct and partner sales channels.

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James Mickleboro 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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