The Livetiles Ltd (ASX: LVT) share price dropped 4.41% lower today after the company announced that Wizdom has successfully met its earn-out conditions following strong growth.
LiveTiles acquired Wizdom, Europe's leading intranet business, in February 2019 for an upfront consideration of $9 million cash and $19 million in LiveTiles shares.
What does LiveTiles do?
LiveTiles supplies tools to create dashboards, employee portals, and corporate intranets that can be enhanced by artificial intelligence and analytics. LiveTiles is headquartered in New York with operations across the US, Europe, and Australia.
As at November, LiveTiles reported $42.9 million in annualised recurring revenue and is targeting $100 million by June 2021.
The company estimates its addressable market to be worth $13 billion and consist of some 300,000 customers. LiveTiles landed its first paying customer in February 2015 and now boasts more than 900 customers across every major industry vertical.
Wizdom acquisition
Wizdom is a leading 'plug and play' Microsoft-aligned workplace software business. At the time of the acquisition, Wizdom had a strong European footprint with 243 Software-as-a-Service (SaaS) customers including Nokia and De Beers.
Wizdom's software is built on the same Microsoft technology platforms as LiveTiles. The acquisition extended LiveTiles' product portfolio with a complementary offering. As such, Wizdom has driven significant growth in LiveTiles' average contract value with strong uptake by large enterprise customers and growing demand for bundled deals combining Wizdom, LiveTiles, and Hyperfish technology.
Terms of the earn-out
As at 31 December 2018, Wizdom's annual recurring revenue (ARR) was A$8 million. Under the acquisition, an earn-out of up to $16 million applied if Wizdom could achieve ARR of at least €8 million and positive earnings before interest, tax, depreciation and amortisation (EBITDA) for the 12 months to 31 January 2020.
Today, LiveTiles revealed that Wizdom has achieved strong ARR growth of 87% in the period to 31 January, with ARR increasing to $15 million. Wizdom also generated positive EBITDA during the period.
The earn-out consideration is to be paid 25% in cash and 75% in LiveTiles shares, with $4 million in cash to be paid and 40,127,954 LiveTiles shares to be issued at an issue price of 30 cents per share. The cash component will be paid out of LiveTiles' existing cash resources.
Integration
Wizdom's sales, marketing, finance and product teams are more fully integrated into LiveTiles' organisational structure. All key team members have been retained since the acquisition including the co-founders.
LiveTiles CEO and co-founder Karl Redenbach said, "it is pleasing to see Wizdom perform so strongly in the first year post acquisition and we are confident Wizdom will continue to be a key driver of our strong enterprise customer and revenue growth in FY20 and beyond."
