My answers to the questions you asked will be succint (but I hope objective) . These answers are not designed or intended to advocate either for or against the stock but simply answer questions raised. For obvious reasons, all the usual caveats are intended regarding forward looking statements......they are opinions not forecasts .....and I bear NO responsibility for their accuracy. They are based on rough notes .
1. Cost of Acquisitions (Gdaymate, Alpha100). LVT see COA continuing to decline (i) Lead pipeline has grown faster than the direct sales team. Increasing focus on larger opportunities for the direct sales force gets more bang for the buck. (ii) There will be an increasing contribution from the partners channel (resellers). Partners are generating their own sales + LVT is passing on leads to partners. There has been significant growth in # of active partners in last 12 months and LVT believe this will come through in increased partner sales in coming quarters. Partner sales have minimal COA. Increasing the partner channel is a major strategic emphasis for LVT in 2019. (iii) As the business grows, the cost of central overhead relative to the size of business declines. (iv) Wizdom acquisition and integration is largely done and will have beneficial effect.
2. Total Addressable Market and Competition. Almost all large and medium sized organizations have an intranet. The traditional model was to hire an IT consultant/systems integrator to build/code the organizations intranet. Typically, external IT would do 60% of the coding and the in-house IT staff would code the final 40% on a department by department basis. Some would include code heavy systems integration software such as Jive or IBM Connections.
The customer opportunity for LVT and their competitors is actually twofold: 1. Organizations moving from traditional model to SAAS intranet software. This is especially associated with organization moving to off premise 3rd party cloud platform for their intranet. 2. Organizations still using a systems integrator for external work but using LVT Design etc as a low code/no code solution for internal customization.
Intranet -in -a -box solutions (often including server space) are aimed at the sub 100 and sub 50 employee organizations There are a number of players in this space but LVT does not go up against them when pitching to organizations over 100 employees.
An organization over 100 employees moving to off premise MSFT cloud platform might contemplate an SAAS intranet portal software solution (aka low code/ no code intranet). An organization , even with their intranet based on on-premise servers, might contemplate adding intranet portal low code software to their system to make it easier to keep their intranet up to date and relevant for employees. The potential market is large and still in very early stage of penetration.
These 5 are substantially ahead in size and product offering. LVT however is emerging as a leader with 4x the revenues of the next largest competitor (Unily).
There are other smaller competitors but they are all sub $ 4m in annual revenues .
(in the previously expressed opinion of VMK Research )Scale will matter and the current fragmented market will consolidate to a small number of larger players.
3. Travel and Entertainment Expense The vast majority (well over 90%) of T&E is customer and sales orientated. Eg. Traveling and hotels to see prospective customers and attend conferences.
4. Is LVT a true SAAS subscription service company? (Dwhale) Wizdom included a small consulting revenue stream. This is not included in ARR. Apart from this all of LVT's customer revenues are recurring subscription revenues. The ARR number is externally audited. LVT does not provide server based services, all of its subscription revenues are purely for software, which is downloaded onto the customers' platform. In short, LVT is a pure SAAS company.
5. Wage Expenses (Kingz) There is not a question to ask here. June 2019 year end, annual wages and salaries will per financial statement was approx A$15 million . LVT presentation revealed that the number of employees was 180. I will let readers do their own math, and calculate the average US $ salary at LVT and then compare this to executive salaries at MSFT (where a number of senior LVT employees came from) and the starting salaries for software engineers and the salaries for seasoned IT consultants and software sales people. The right question might have been "how have you managed to keep salaries and wages so competitively low?" I did not ask it. More Later. Traveling. Back next week. Until then, keep it real.
LVT Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
