Ann: 1st Half FY19 Results Announcement, page-115

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KainCarver

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27/03/19

12:50

Post #: 37899759
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Originally posted by Vmk Research ↑

Thanks Kain.Great work. None of us here picked up on that article. I don't know how it missed our search software (which we pay a bloody fortune for) . It turns out that my insatiable appetite for midnight strolls around obscure Australian investment chat rooms are worthwhile.

I think that if we read closer there are a couple of interesting financial insights to gather from that article.

What does it tell us about our cash flow models?
1. LVT already has in place a scale marketing department. The article reveals a head of marketing + in house marketing team of 16 professional FTE....+ in house Ex guy hired from an agency. They staffed for scale! That tells us that there is significant financial leverage in the cash flow model as revenues grow. Less than 10 and you are going to be adding staff as you grow , at 15-20, that should provide channel coverage and I bet they dont need to add at four times the size.“It hasn’t been cheap, but it has worked, ...,” Rameka says. “I would say investment in brand awareness has really worked for us .”
2. By the way this small data point matches other data points about LVT. LVT has hired very senior people for such a relatively small and young company. Some of the ex MSFT people are heavy hitters and will not have come cheap.
3. Which means that the overhead cost is higher in the early stages of growth but provides leverage as revenues grow (costs are already in place and growth flows to cash). Since our investment thesis (and I think others on this thread) hangs heavily on an expectation of an inflection point in cash flow. Kain has found an interesting little nugget.
4. If the overhead is higher than we think, then this means the gross margins are higher than we currently realize. It is tidbits like this that tell us what to look out for in the quarterly numbers. Is the marketing expense (vs sales) growing less fast than revenues?

Depth of Relationship with Microsoft
1. It is interesting to read about the close relationship with MSFT away from the financial press. Its an independent data point.
2. Then we look up Gavriella Schuster and find this. https://blogs.partner.microsoft.com/mpn/gavriella-schuster-named-cvp-of-worldwide-partner-group/ . Its another independent data point that demonstrates how well LVT is placed in the MSFT ecosystem and the level of the relationships.

Does it make me rush out and buy another million shares? Nope.
Is it good investigative research that adds another piece to the puzzle? Yup. Absolutely.

Expand

Appreciate that, VMK, and appreciate you (guys) sharing your analysis here for the rest of us as your contributions here have been invaluable.

The ties with Schuster run deep by the looks and while there are other coys affiliated within MSFT's partner program, I think reading between the lines with the various hires etc reveals the confidence MSFT has in Redenbach & his team.

On a more personal note, I'm looking forward to hearing (hopefully) more on LVT's ties with the with Victory Tech in relation to the US Government/Department of Defense they mentioned back in Nov.

Last edited by KainCarver: 27/03/19

LVT Price at posting: 49.5¢ Sentiment: Buy Disclosure: Held
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Ann: 1st Half FY19 Results Announcement, page-115

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