LiveHire Limited

Company Overview: LiveHire Limited (ASX: LVH) is a software company, which is focused on the enhancement of talent through a platform-based approach that is scalable in nature. Its SaaS talent acquisition and engagement platform provide mid to large clients to enhance their Talent Acquisition process. It has its operations spread out in the ANZ region and North America.

LVH Details

Decent Growth in Revenue on the Back of Increasing Clientele Base: The company has delivered a decent performance in FY21 with growth across key business drivers. This has enabled growth and momentum to be carried into FY22.

Growth in Client & Revenue Base in Direct Sourcing Client Performance:

• The company has ended FY21 with 14 clients and partners, compared to 12 from the prior year-end.
• Clients EACV grew to $4.2 million, from a level of $0.6 million in twelve months. LVH reported over $15 million in the pipeline at Opportunities Live.
• Revenue has exceeded performance due to a spike in COVID hiring.
• In QTD FY22 performance update, the company has signed 2 partners and 3 clients.

Strong Traction in SaaS Business:

• The business unit delivered a decent performance in FY21, with recurring revenue up by ~24% to $4.322 million, compared to the pcp.
• Closing clients increased by ~25% to 138 as of 30 June 2021. Some of the prominent clients who were included during the year were Telstra Purple, Varsity Group, Hudson RPO, Heart Recruitment, AccorPlus, to name a few.
• 90% of the total revenue has been recurring in nature, supported by the focus on multi-year ARR sales.

Overview of FY21 Performance:

• The company reported an improvement in revenue to $6.32 million in FY21, compared to revenue of $3.50 million in the prior year.
• There has been an improvement in the margin performance through continued optimisation and prudent cost measures across the business.
• Total clients (SaaS & Direct Sourcing) increased by ~36% to 152 during the year, and there has been an improvement in the cost per client data.
• Cash burn was down by over 50% to $6.6 million in FY21, compared to ~$13 million FY20.
• It ended the period with a cash balance of $14.4 million as of 30 June 2021.

Increasing Trend in Revenue (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form around 50.77% of the total shareholding, while the top 4 constitute the maximum holding. FIL Investment Management (Hong Kong) Limited and Haywood (Michael) are holding a maximum stake in the company at 9.72% and 8.90%, respectively, as also highlighted in the chart below:

Top 10 Shareholders (Source: Analysis by Kalkine Group)

Key Metrics:  The company has reported gradual improvement in its profitability profile, with net margin improving to negative 131.1% in FY21, compared to negative 417.7% in FY20. Cash cycle stood at 104.1 days in FY21.

Profitability Metrics and Asset Turnover Profile (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the following risk factors:

• Scalability Risk: It is faced with the risk of scalability issues which in turn could impact the profitability of the company.
• Data Security Risk: Being a technology-enabled company, it is prone to the risk of data breaches of its clients and cyber security concerns.
• Competition Risk: LVH’s line of business also exposes it to stiff competition from its peers.

Outlook: The company has commenced operations in FY22 with decent momentum and a stable balance sheet gives comfort to leverage on the increasing market opportunity in the Direct Sourcing vertical in North America. It will look to consolidate its position further in the ANZ region with its SaaS-based offering. With the expected increase in hiring trends across the organisations, there seem to be favourable tailwinds in the sector going forward.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: On 1 July 2021, the company has announced that it has appointed Kathryn Rostrom Foster as an Independent Non-Executive Director. Kathryn has extensive experience in the North American technology market. As per ASX, the stock of LVH is trading around its average 52-weeks’ levels of $0.245-$0.475.   The stock of LVH gave a positive return of ~14.84% in the past one year and a negative return of ~0.67% in the past six months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight premium to its peers’ average, considering the increase in clients, optimistic sector outlook and top-line growth. For the purpose of valuation, few peers like Schrole Group Ltd (ASX: SCL), TechnologyOne Ltd (ASX; TNE), Xero Ltd (ASX: XRO), WiseTech Global Ltd (ASX: WTC) have been considered. Considering the expected upside in valuation & current trading levels, impressive financial performance, decent traction in sales & clients, strong balance sheet and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.360, up by 1.41% (as on 03 September 2021, 10:26 AM (GMT+10), Sydney, Eastern Australia).

LVH Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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