First US customer offers significant potential
LiveHire (LVH) has entered the US market for the first time, signing a contract to deliver its Talent Community system to Workforce Logic, a provider of both short-term and permanent employees to medium-to-large scale employers.
Workforce Logic will initially implement the LiveHire talent pool system with five of its smaller clients. Recurring licence revenues from the first five clients won't be company-making, running at around A$150k per annum. However, a roll out over a much broader sample of the Workforce Logic client base would entail a step change in annualised recurring revenues (ARR).
No change to forecasts, valuation
Our forecasts already assume a steady gain in the number of paying customers in each half-year period and the first five customers signed with Workforce Logic fall within our current forecast range for H2 FY19. As such, there are no changes to our profit forecasts, discounted cash flow valuation or share price target.
Risks and catalysts
Risks to our forecasts and the LVH share price include:
- new direct clients taking longer to sign up and generate revenues;
- global RPO clients may be slower to generate new revenues that we have forecast; and
- more serious competition from global HR technology groups.
Potential near-term re-rating catalysts include:
- LVH is successful in signing several large clients which results in significant revenues;
- global RPO clients sign new clients and generate significant revenues; and
- major global HR technology providers integrate with the LVH system.
LiveHire (LVH) offers investors participation in the growth of a game-changing recruitment system. Should the company be successful in implementing its strategy, the rewards for shareholders could be substantial. However, the company is an early-stage technology business and has yet to become self-sustaining from a cash-flow perspective. The stock is high risk.
As LVH trades well below our valuation and share price target, we maintain our Add recommendation.
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Disclaimer(s): Analyst owns shares.
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