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LiveTiles (ASX:LVT) share price tumbles 11% on Q4 report

The LiveTiles Ltd (ASX: LVT) share price is sinking today after the New York-based enterprise technology business released its Q4 FY20 results.

LiveTiles provides cloud-based intelligent workplace software for more than 1,000 corporate clients in over 30 countries. Through its integrations, LiveTiles can offer clients the ability to use popular online software tools like Microsoft 365, Google Drive, communications through Slack, financial reporting with Expensify, security by Okta, customer management through Salesforce, and lots more.

What did LiveTiles report?

The headline figure from today’s update was LiveTiles’ maiden positive operating cash flow result, which came in at $1.2 million. This was a big turnaround from the $8.8 million net operating cash outflow reported in Q3. However, the $1.2 million was a normalised figure, excluding $2.3 million of non-recurring expenses (primarily redundancy costs) and $7.5 million of government grant income.

On the whole, LiveTiles’ cash balance grew $4 million during the quarter to stand at $37.8 million as at 30 June 2020.

Fourth-quarter cash receipts from customers rose by 3% quarter-on-quarter (QoQ) to $11.2 million, marking LiveTiles’ third consecutive record quarter.

Turning to sales, annualised recurring revenue (ARR) was $58.2 million at the end of the quarter on a constant currency basis. This represents QoQ growth of 5.4%, and year-on-year growth of 45%. Average ARR per customer is now $53,317, also on a constant currency basis, which is a 3% increase compared to March levels.

LiveTiles also added 24 new net customers during the quarter, taking the total to 1,092.

Operating environment

LiveTiles noted that it continues to be disrupted by COVID-19, with the pandemic making for a challenging sales environment for enterprise software. As a result, the company has revisited its balance between cash burn and growth, deciding to prioritise lowering cash burn in the near-term in order to maintain a strong balance sheet. To this end, LiveTiles managed to decrease its operating cash burn by 88% compared to the third quarter.

The company said it will realise the full benefit of its cost reduction initiatives during Q1 FY21. However, it doesn’t expect to be operating cash burn neutral in 1Q21 in light of the current operating conditions.

Nonetheless, LiveTiles assured investors it has a strong medium and long-term outlook, with COVID playing a global role in accelerating digital workplace software adoption. The company said its pipeline was building strongly throughout the last quarter through both direct and partner channels.

Management commentary

LiveTiles CEO and co-founder Karl Redenbach had this to say about the results: “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.”

Now what?

On the whole, this appears to be a fairly solid set of results. Perhaps the market had priced in more sizeable growth, especially considering that LiveTiles’ software should lend itself to a world suddenly reliant on remote working.

Whatever the case, all eyes will be on the company’s cash burn in the next quarter, with investors hoping this step-change reduction isn’t a once-off.

I’m happy to watch this play out from the sidelines. Personally, I’m far more interested in the ASX small-cap tech company profiled in this free 3,500-word investment report.

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Disclosure: At the time of publishing, Cathryn has no financial interest in any of the companies mentioned.

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