Today......why dont I start with some thoughts on the Product Range. There seems to be some confusion on what LVT's software actually does for the customer. The confusion is understandable because this is not software that consumers or private individuals are going to see or readily understand.
LVT provides Enterprise software for large and mid sized organizations. Their customer base includes : Nike, Heineken, Pepsi, United Airlines, the US Department of Defense etc. The customer base is growing rapidly and their "win rate" (their ability to convert prospects into customers) is nothing short of astonishing.
LVT's is an "intelligent workspace" software company. There are a number of companies in the space but what the heck does it mean? This is an evolution of the "digital workplace" revolution. The early stages of digital workplace software provided tools so that when an employee sat at his desktop computer the software allowed him or her to access to data and information to do his or her job. Intelligent workspace software goes one step further and the software assists the employee use and interpret that data and information and incidentally to do that across all devices (desktop, laptop, mobile devices etc) .
LVT has four families of product:
1. LiveTiles Design. At the core of this product range is an intranet portal product. Every mid/large organization has an intranet , its own internal network linking employees to share data etc. If you work at Nike etc., when you come in to work in the morning and turn on your laptop, you go to the Nike employee home page which is only accessible to Nike employees. This home page will provide you with access to different proprietary databases within Nike and access to the different software packages that Nike has subscribed for (Salesforce if you are in marketing, SAP if you are in processing, Dropbox to share docs, Office 365 for MSFT products etc etc) and it probably contains a few announcements and news items on the corporate internal home page as well. This is the "portal" and it is the front door into the corporate intranet. The portal will carry the corporate logo and brand conscious organizations will give a lot of thought about layout and design.
Historically , before the advent of the cloud, the intranet was based on company servers and the portal was designed and built by systems integrators or IT consultants who would charge millions of dollars to build a customized portal for the company, writing lines of code that integrate different databases etc.
Once organizations started moving to third party cloud based data and software (Azure, Amazon etc) it provided an opportunity for cloud based software to enable enterprises and corporations to build and maintain their portals in a wholly different manner. LiveTiles Design allows an organization to install a ready made cloud based portal that accesses all of their cloud based data and software subscriptions and to customize the portal with simple click and drag instructions that can be handled by internal administrators or IT staff in a much quicker and easier manner than writing lines of custom code. The LVT Design cloud product offers four (4)
compelling advantages to the customer over the old model :
1. Cost Saving : It literally saves millions and millions of dollars in terms of IT consultants and system integrator fees.
2. One Size doesnt fit all: Many of these global organizations have dozens of different departments based in dozens of different geographies. The traditional model would force them to have the identical corporate portal or spend more millions of dollars customizing the portal for different departments or different regions. The LVT Design product enables regional managers to customize their departement's portal layout with password controlled click and drag tools....BUT (this is important)....everything remains on the same portal platform .
3. Flexibility: The world changes. Organizations are continually evolving their priorities and they want to amend their portal accordingly. Again, LVT Design makes this faster, easier and more cost effective.
4. Intelligent Portal. This is potentially the most important and hardest to explain. It is at the heart of the investment thesis of why LiveTile is such an interesting company for the longer term. The portal is the front door into an employee's access into the company. The employee passes through that front door every time they do work within the company's intranet. That generates a lot of data. The employee passes through that door every time they use dropbox or salesforce or Office 365 or DotDigital, every time they talk to a customer or a supplier. The portal can become the intelligent hub of the employee's use of the intranet....providing the organization with information about how the employees are using software and data .....and assisting the employee to be more effective (eg. the intelligent portal could notice the employee is still using an outdated version of customer engagement software and direct the employee to try the new ClickDimensions software or DotDigital software that the company has just purchased.....or, yes, eventually the portal could provide bots to help the employee with using company data or even taking on some of the mundane tasks of the employee)
There are two questions we (investors) should be asking:
1. Hey, doesn't Microsoft Sharepoint already do some of this? Answer: Sharepoint is a terrific platform for an organization's intranet but Sharepoint is not User Experience (UX) friendly software. If employees had to directly use Sharepoint, most of them would be lost. Either you need a systems integrator to build a front end or you need LiveTiles Design. Microsoft fully understands this and hence why they view LVT as such a valued partner. MSFT will introduce LVT to a prospective customer as part of the Sharepoint sales process to very large customers to help MSFT close the Sharepoint sale.. Microsoft wants its sharepoint customers to buy something like LiveTiles Design in order to ensure customer engagement on Sharepoint . Such is the close relationship between LVT and MSFT that every Sharepoint enterprise customer is a prospective customer for LiveTiles Design. The compelling example is that Microsoft itself is a customer of LVT using LiveTiles design for its own in-house sharepoint portal.
2. Hey, didn't Wilsons the stockbroker do a survey of systems integrators and IT consultants who build enterprise systems on sharepoint and get some negative comment on LiveTiles Design? Seriously???? This was like asking book stores twenty years ago what they thought of Amazon. The right people to survey are the Chief Technology Officers of large organizations. Companies like Nike, Pepsi, Heineken etc are extremaly sophisticated buyers with sophisticated in house IT staff who test the hell out of any software product before committing their entire corporate intranet to the software.
The Total Addressable Market of Live Tile Design can be looked at compared to Sharepoint. If LVT got a market share of 5% of sharepoint users, then the LVT Design product alone on solely the Sharepoint platform would generate $144 million of revenue. If the product (and it is Microsoft's preferred vendor) obtained a 20% market share , the Design product would generate $575 million of revenue.
But LiveTiles Design will be sold on other platforms besides Microsoft Azure and Sharepoint. It already is sold on other platforms but the Microsoft relationship is so deep and so valuable you will never hear LVT beating their chests about that.
Wizdom was LiveTiles biggest competitor in Europe. At a stroke, they have a dominant position in intelligent portals in Europe. There are no anti-trust concerns because the whole space is so new, so small and growing so fast. Wizdom is a great brand name in Europe.
2.
HyperfishHyperfish is appropriately named. This software "fishes" for data in the enterprise intranet. The algorithms underneath the software will be able to create a number of different products where ever an enterprise needs to pull data from employees to fill an internal database. At the moment the single product focuses on fulfilling the organizations Active Directory.
"Active Directory" is the organization's identity directory within Windows and Azure that authenticates and authorizes all users and computers in a Microsoft based network. It it allows management and storage of information, provides authentication and authorization mechanisms, and establishes a framework to deploy other related services, for example certificate services, authorizing an employee to use software and billing the company for that software.
Most organizations' Active Directories are woefully out of date. Hyperfish discovers incomplete or out of date information within the Directory and fishes the employee to update or complete the date.....it is AI that literally pesters the employee to complete the necessary information. This is a brilliant product for 2 reasons;
1. It will save organizations 100s of thousands of dollars. Outdated active directories are charging companies for software on laptops which have been replaced, on employees who have left or seats which no longer use the software.....and more importantly are not engaging employees with software that they should be using (hence the link to an intelligent portal strategy)
2. MUCH MORE IMPORTANTLY. AI will be deployed within organizations based on the Active Directory. Incomplete or outdated active directories are going to severely hamper the installation of AI within an organization. Organizations have to get their active directory in shape. It is the #1 priority of many CTOs.
The product was the brain child of Brian Cook and Chris Johnson. Brian is a brilliant software entrepreneur who already has several hundred million dollars in the bank from selling his workflow software company Nintex for $1 billion. Why did Brian sell Hyperfish to LVT and join the management team of LVT.
- Hyperfish is a natural fit with LVT Design. It can be sold as a package with te intelligent portal.
- Brian has enormous personal respect for the management of LVT. Above all, he thinks they have the best commercialization skills in the business. In short, LVT can sell!
- Brian becomes the largest shareholder in LVT after the 2 founders.....and that suits him just fine. He believes in LVT and thinks he will make a lot of money in LVT.
- Brian was right, after Hyperfish joined the LVT product suite, sales have taken off and they are exceeding their performance hurdles for the performance payment. Brian gets even more shares. He is a happy camper.
LiveTilesBotsLiveTiles Bots is a pure AI product with a very similar business case to LiveTiles design. Organizations around the world are spending tens of millions of dollars hiring IT Consultants and integrators to install customized chat bots to answer questions and do mundane tasks.
LiveTiles Bots provides bot software in the cloud as a subscription model so that customers can build their own bots, customize bots , alter boats etc with a simple and easy to use front end. Once again, LVT has brought their superb UX (user experience ) skills to bear on making an essential enterprise tool easier and simpler to use. Customers can click and drag to design bots and customize bot personalities etc.
The recent case they announced was an airline. There is not a lot of information around but we speculate the bot helps the baggage handling process.
One customer told us that it cost them close to a million dollars to build one customized chat bot before they subscribed to LVTBots which enables them to build, maintain and customize as many bots as they like each year for 80% less money.
Its a natural fit because where are you going to access your helper bot? Yup, you got it...the portal.
LiveTiles IntelligenceThis is the Valhalla of Intelligent Workspace software. Its the ultimate goal. As you will see later we currently ascribe no value to this piece of the business - its an option that we get for free with the existing business. We like that the management see it as a key component of their strategy. We like that they define it as the fourth element to their product range . We like that they are already selling it as an add-on service to existing products. We like that they are spending research and development dollars in this area. The opportunity is obvious and very large. An enterprise intranet that continually provides smart intelligence on how effectively employees are using the organizations data and software....and continually assists employees take maximum advantage of the data and software tools that are available to them is every organizations goal.
The provider of the portal hub software is in a terrific position to orchestrate intelligent data and AI. However we are not valuing it yet because (a) We do not know with any kind of precise knowledge what LVT's current product does and (b) We think the sales are very early stage.
We dont have to value it either because why worry if a company might be worth $5bn if it is worth $1bn on existing products.
I hope that is helpful on products. I will talk about management, cash burn and valuation in future posts. Have a great weekend!
