ValueSearch had one incorrect number across a 20 year array. You made a spelling mistake. It happens. It doesn’t give you the right to deride people, nor do they deserve it - contrary to your assertion.
Back to LVT, and how it’s possible some people don’t share your view.
-LVT has done a huge amount of good work bringing down costs (cost out), but they are still not cash flow positive. There will be less low hanging fruit to further reduce costs from here.
-LVTs has drawn down high yield debt, and they don’t have an abundance of cash reserves or high expected profit or free cash flow currently.
-Should LVT see a decline in ARR, which each person here can ascribe their own likelihood this occurs, then they will see a corresponding fall in trailing cash receipts.
-This would necessitate even further cost out, and they will have less wiggle room to do so given the work already done.
-A capital raise could mitigate any cash flow concerns should ARR fall, but it would be incredibly difficult and dilutive in current market conditions. Assume they could get this done at 4 cents, they would need to issue 500m new shares to raise $20mn. The current shs on issue is circa 923mn. Can adjust metrics accordingly on size/price depending on the amount you think they might want to raise if they had to and the price they’d see demand at.
-LVT’s decline in ARR growth rate has come whilst they cut marketing spend. Any increase in marketing spend would take them further away from cash flow positive.
-To grow more rapidly, they likely need to increase marketing spend. With low cash reserves and not stellar market appreciation of LVT, it puts them in a conundrum.
-LVT’s margins have likely been compressed. You noted it yourself a few posts ago. This means they don’t have the pricing power they would like. This is likely the result of either competitive products in the space, or luke-warm demand from prospective clients. This means they will need to sell more product to maintain profitability.
-Once again, this points to key risks if historically won more profitable/higher margin clients cease using LVTs products.
-LVTs churn rate has improved, but it continues to be far higher than ideal for a SaaS business. The co has put that down to COVID factors. This very well may be the case and things further improve, but it also may not improve, and we can’t be certain that LVT management has been 100% honest about the drivers of churn. They have been fast and loose with truth historically.
-Once again, any steady churn coupled with margin compression needs higher sales to maintain the status quo, and LVT don’t have a huge warchest for a sales offensive.
-LVTs marquee client wins of UHG and Nestle didn’t seem to move the needle much with respect to ARR.
-We have seen no concrete news or announcements to indicate LVT have secured any recent marquee signings.
-LVT had talked about new strategies and transitionary periods.
-LVT has talked with confidence about the confidence that their acquisitions will help improve the overall company (be it new or better products, streamlined or broader offerings, or brining in new clients).
-Go back through the last 3 or 4 years, and this has been a constant story and game plan for them. While will it be successful now when it wasn’t historically?
I have no economic interest in LVT. I hope for everyone here that it turns out to be a great investment. What I have detailed above are just risks, they are by no means certainties. Not a single one of the risks may play out. But at the same time, some of them may. So anyone looking at LVT should ascribe a level of probability and risk weight their assessment of LVT. I haven’t listed any of the positive possibilities. There are many. But my point is…
LVT is by no means a home run. It could turn out to be one. Nobody really knows. You don’t, I don’t.
I wish for good fortunes for all holders, either current or future.
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