Yes we have the same numbers. The column you might add is the average size of new customer.
The number that, unfortunately, we do not have is the number of seats that LVT has sold each quarter.
We agree in that We think that the growth of ARR is directly related to Cost of Acquisition (COA) and Expenses. COA is the money spent to win a dollar of new business and the other factor is how much money you spend. If it costs ta company $3 on average to obtain a 10 year contract of $1 per year , the COA is 3.0. If that company spends $30m, their ARR will grow by $10 million. If COA improves to 2.0 then ARR will grow by $15 million for the same expense.
There are many factors that affect COA and management should be all over it . two factors are very important. Average size of new customer. If your sales team were bringing in $50,000 customers a year ago but are now bringing in $100,000 customers, their COA will halve. ( except larger customers have longer lead times) . As the pipeline increases, management will naturally focus on the larger opportunities. The second factor I would consider is ARPS....average revenue per seat. If a customer buys a package that includes Hyperfish as well as Design then ARPS might be 50% higher than just the core product.
Finally as management consider how to allocate resources to maximize efficiency of COA, they have to decide how much to spend on selling more to existing customers vs winning new customers.
It is our belief that LVT has been very focused for the last 4 quarters on doing larger deals. This improved COA. We captured that in our model and our forecasts were pretty good......certainly better than street average. Going forward, we think an additional dynamic that will affect forecast models will be the increased emphasis on the partner channel. We haven”t enough information to figure out how to incorporate that yet. If I had to guess, purely guess, I would think there is 6 months of increased upfront dedicated partner training costs and then payback but this may have started a quarter back. We have found out that LVT is offering system integrator / resellers a slightly different model than the competition based on long term revenue sharing vs upfront commission. We believe (not certain) that this is a model that was working well for Wizdom. There will be interesting data points in the coming quarters. December is seasonally more significant
LVT Price at posting:
36.5¢ Sentiment: None Disclosure: Held
