LVT - Valuations, page-59

For LVT specifically I think there are a few factors that investors will be considering (in no particular order):

Products - is the world ready for intelligent workplace solutions? Do employers and employees understand the benefits? Are C-suites and IT professionals adopting change as quickly as they could? How do businesses and investors alike feel about AI and how it will transform the way people work? The Microsoft ecosystem is a competitive playing field so what makes LVT stand out?

Growth uncertainty - arr at 30 July 2019 reached $40.1m, 167% up on prior 12 months. But at 30 Sep 2019 the number was $42.9m (a slowed 7% quarterly growth). Was this slower growth an anomaly considering Q1 and Q3 are normally quieter quarters or is it representative of something more permanent? Can they meet the implied 62% CAGR required to hit their 30 June 2021 goal?

Sales - what does the current pipeline look like? The company hasn't mentioned the N3 sales and marketing team since January 2019. The 60 person strong team grew a pipeline of sales to $50m very quickly but how is it looking today? From the Q1 conference call the CEO said the pipeline has grown significantly since Sep 2018 but that deals are also taking longer than they would like. In Q4FY19 the marketing of bundles commenced, which naturally have a longer sales cycle but higher average contract value and retention rate. We also know that they are happy with their net number of transacting partners but are focused on helping these partners build LVT solutions for their underlying customers. In Q1FY20 they launched a refreshed partner program in order to do this. Does this mean that the uptake of LVT products is currently experiencing more challenges than in the past?

Funding and cost management - the company has done a good job at improving net operating cash flow from $11m in Q1FY19 down to $5.3m in Q1FY20. On paper it appears that Stage 2 growth has been reached with an inflection point of revenues and costs. But is this trend set in stone or will we still see some hiccups moving forward? This then ties into funding:

The company successfully completed two oversubscribed raises in 2018 - $20m + $3m SPP (SPP was under-subscribed) at 45cps in February and $25m + $2m SPP (SPP heavily oversubscribed) at 59cps in August. In 2019 there was a tailored raise in February for $15.3m at 34cps for the Wizdom acquisition and one oversubscribed raise in September of $50m + $5m SPP at 35cps. At the end of CY2017 there was 450m SOI and at the end of CY2019 there was 860m SOI (c. 50% dilution). How much more dilution do investors need to factor into their calculations?

Over this timeframe the company has also completed three acquisitions - Hyperfish May 2018, Wizdom February 2019 and CYCL December 2019. We know that the CEO keeps a close eye on near competitors and is open to acquiring complementary products. Will we see more of this in CY2020 or can the sales teams and partner/alliance channels be relied upon to drive strong organic growth? Perhaps we will see a combination of both and what will this mean for the current cash at bank (c. $43-$47m post CYCL acquisition and Dec quarter operating activities)?

30 June 2021 goal - will not meeting the goal be seen as a failure by investors? But are investors placing too much emphasis on the "end" goal rather than the daily steps being taken to drive revenue and customer growth and ultimately a successful long-term business? @T.E.P. has just done a good extrapolation on a new thread that highlights that investors are currently factoring in no to very little growth over the remainder of FY20. Is this the case or will solid growth continue? I think the later is much more likely.

I have a long term outlook on LVT and am optimistic about these factors while acknowledging that there will continue to be ups and downs in the road ahead. For now I will leave these questions open for thought but will likely come back and answer some of them later (many have already across these threads).