Shares in small-cap tech company LiveTiles Ltd (ASX: LVT) have shown some long overdue signs of life this month.
Since the beginning of July, LiveTiles shares have rallied almost 14% to $0.165, at the close of trade on Friday. But while the jump in share price will be welcome news for shareholders, it comes amid a disappointing period for the company. Even after the recent surge, LiveTiles shares are down over 30% so far this year. This is uncomfortably close to the 52-week low of $0.145.
Let's take a look at the reasons behind LiveTiles' disappointing share price performance – and see whether this recent jump might be the first sign of a turnaround.
LiveTiles background
But first, a little background information on the company.
Originally founded by two Australian tech entrepreneurs, LiveTiles has grown into a global software company headquartered in New York. It specialises in building engaging, interactive intranet portals for its business clients.
But this is no simple drag and drop intranet template. LiveTiles uses machine learning and artificial intelligence technology to enhance the user experience and create collaborative online workplace solutions. LiveTiles' software uses data analytics to deliver insights that can be used to boost staff engagement.
Its workplace software has already won it some powerful friends. For example, it is a premier technology partner of multinational technology juggernaut Microsoft Corporation (NASDAQ: MSFT). This means that LiveTiles' core software is capable of being deployed with Teams, Microsoft's communication and collaboration platform. The two companies have also been involved in co-selling activities in at least 39 countries.
So why has LiveTiles been underperforming recently?
In some ways, LiveTiles underwhelming share price performance is a bit of a mystery. If you believe the news out of the company, it's growing faster than ever.
In a letter to shareholders, released last year in response to the escalating COVID-19 pandemic, the company proudly spruiked the fact that the Australian Financial Review had named it Australia's fastest-growing technology company.
And in its most recent financial presentation, for the quarter ended 31 March 2021, LiveTiles reported that, since the March quarter 2017, annualised recurring revenues had increased by over 500% (from just $8.5 million to $52.8 million). And yet, its share price now is lower than it was all the way back then.
Recent news
The reason behind the recent rally was likely the company's announcement that it had inked a new deal with multinational food conglomerate Nestle. The deal is the largest yet for LiveTiles' Europe, Middle East and Africa (EMEA) segment. The contract is for three years and should net LiveTiles at least $2.1 million in revenue.
Under the deal, LiveTiles will deliver a cloud-based employee experience platform. In the project's initial phase, the platform will be rolled out to 125,000 users. But the goal will be to eventually have the platform used by Nestle's global workforce of more than 300,000 employees.
LiveTiles financials and outlook
The Nestle deal continues a strong period for LiveTiles. The third quarter also included another record signing – a $3 million three-year deal with American healthcare and insurance company UnitedHealth Group Inc (NYSE: UNH).
While the company's third quarter investor presentation didn't include firm earnings guidance numbers for the remainder of FY21, it did hint that underlying business momentum remained strong. The company's sales pipeline increased by 139% in the third quarter, and the company is continuing to focus on growth opportunities while keeping costs down.
Commenting on the company's third-quarter results, LiveTiles co-founder and CEO Karl Redenbach said that he had, "confidence in the Employee Experience evolution, the breadth of this addressable and emerging market and the positioning of the LiveTiles strategy for success."
