The culmination of all these factors was the recent announcement of the deal with N3. There are a number of questions raised by this deal:
- Livetiles will pay N3 ~US$9.6m p.a. for outsourced marketing expenses. Is this in addition to or a replacement of the existing cost base? Regardless if some is replacement expenditure, it appears to represent another leg up in expenses.
- LVT are booking US$2.7m of ARR by selling products back to N3. The nature of this deal is strange considering ARPU for other customers is in the order of $15k. Note that N3 receive 3.5x as much from LVT as they pay to LVT.
- Although the detail is not clear, the deal seems to represent all of the increase in ARR over the period since 31 December. It is not clear what the underlying growth profile of the business is excluding this deal.
There are enough questions raised by the above to suggest that there are some changes underway within the Livetile monetisation model.
In these situations it is helpful to remember the old English adage:
“Change is good my son, but no change is better.”
Disclosure: I direct readers to the general disclosure regarding this website. The above is not financial advice and I may trade in any of the above securities at any time going forward. In relation to the specific securities discussed in this post, I have both bought and sold shares in $LVT in the last 12 months, but no longer hold any position.