What do I think?

It would be easy to dismiss LiveHire as just another technology hopeful. Sales momentum is building and revenue growth is strong but losses are still high and cash is still burning. A pretty common occurrence. However, there is one very, very important difference. LiveHire has the cash resources to make it happen. With $34 million in cash reserves it has the financial muscle to rapidly and aggressively build scale.

It has a powerful value proposition which markedly boosts the productivity of recruiters and greatly reduces the time required to fill vacant positions which reduces employer costs. LiveHire has already established a good position in the Australian market with nearly 80 clients and has put in place channels to quickly build a strong presence in the enormous US market.

The share price has halved to 30 cents since March 2019 and compares with a peak of $1.40 in mid-2017. With cash representing some 39% of market cap place, investors now seem to have fully discounted the company’s potential and have substantially written down the value of the underlying business. With no need for new capital for the next two to three years any major risk for investors has been removed. Accordingly, the upside over this period is considerable should the company achieve its objective of building penetration in the US and substantially increasing scale with a pathway to profitability.

What do you do?

LiveHire is a recruitment platform which enables employers to build and maintain their own active talent pools via company branded, private communities. It is a pro-active talent acquisition and engagement platform that is designed to build a pre-qualified pool of prospective candidates ahead of the requirement for any specific position.

Candidates answer a series of questions and submit their CV’s from which a profile is built. A.I. then assists recruiters to sort these profiles against functions and job descriptions within an organisation so that potential candidates for a position which may emerge can be quickly identified and communicated with (through 2-way text and email) for expressions of interest. The objective is to markedly accelerate the recruitment process, deepen and the improve the quality of the available talent pool for each organisation and transform the candidate experience to a positive and more consumer like.

The evidence is that LiveHire is meeting the objectives of its value proposition with the median time to hire cut to 20 days, with 28% of candidates shortlisted via a LiveHire talent community compared to only 9% from careers websites and 6% from social networks and with a marked improvement in candidate retention. The end result has been greatly improved recruiter productivity, faster and higher quality talent acquisition with significantly lower costs for both recruiters and employers and a much better experience for prospective employees.

LiveHire’s target market is organisations ranging from 500 to tens of thousands of full-time equivalent employees. The company is working with a simple revenue model where clients pay yearly in advance based on their staff levels. Average contract value is around $30K to $50K pa for directly sourced clients and over $100K pa annum from clients sourced from marketing partners who typically target much larger organisations.

Going forward, the capabilities of the platform are expected to considerably increase as greater functionality is added as it is opened up to third parties to plug-in other applications via API’s. Obvious application that comes to mind are validation and verification of employee qualifications and experience and video interviewing, for example. What will emerge is an ecosystem which will, in due course, greatly expand LiveHire’s revenue generating opportunities.

What is the business case?

The recruitment industry is huge with some US$240 billion spent each year in the US alone on “permanent” talent acquisition. Contractor or “gig” hiring is more again. Whilst the internet and careers websites have greatly increased the notional pool of prospective candidates, the quality of the job search experience has “collapsed” for everyone involved. Accessibility and greater transparency have mean that application volumes have typically exploded overwhelming the review and selection process. Accordingly, the timeline for completion of a hire has blown out to nearly 60 days and costs have markedly increased.

Technology’s share of the annual spend is estimated at only 2% but in the search for greater productivity, better quality experiences and lower costs, this share of spend is forecast to rise to 16% over the next few years pointing to accelerated growth opportunities for solutions with strong value propositions, such as LiveHire.

What have you achieved?

LiveHire is now in the early stages of commercialisation of its platform. Revenue is rising sharply off a low base as sales momentum builds. The underlying technology of the platform is now stable and with about 80 clients on board and a number of strategic partners driving entry into the US market there is strong argument that the value proposition has been validated. The task is now to validate the business model. Accordingly, LiveHire’s focus over the past year and going forward has been on building its sales team, external channels and routes to market, which are now well advanced, as well as its own management team.

LiveHire’s model is based on a direct sales team focussed on mid-sized organisations in Australia and New Zealand and using partner channels to address larger organisations in ANZ and generally for US market entry. In ANZ, Vodafone, Xero, iSelect, Kay & Burton, Michael Hill and Super Retail Group are examples of the clients which LiveHire has secured.

In the US, Recruitment Process Outsource providers (RPO) and Managed Service Providers (MSP) have a major presence in the corporate market and are key to building penetration. Accordingly, the company has established partner relationships with Korn Ferry, Manpower Group and Workforce Logiq who each have a significant market presence. Reseller relationships are also being established with consultants and integrators who manage and implement broad technology solutions for large organisations. One of LiveHire’s resellers is Rizing, the world’s second largest implementer of SAP SuccessFactors. LiveHire has a deep integration and partnership with SAP Success Factors, which is used by over 6,700 companies globally. Rizing serveS 40% of SAP Success Factors customers.

Financial Overview

In FY 2019, LiveHire achieved a 59% increase in revenue $2.6 million but with heavy investment in product development and in building sales and marketing infrastructure, in particular, resulted in a 47% increase in operating losses (EBITDA) to $13.3 million. Cash burn increased by 58% to $11.1 million.

In most respects, LiveHire’s financial structure and performance is very similar to many other early stage listed technology companies –  modest revenues, significant operating losses, operating cash burn with a capital light balance sheet dominated by intangibles and cash. However, there is one very important difference which stands in marked contrast to most other similar companies and that it is that it is sitting on a large pool of cash to fund its commercialisation strategy.

Whereas most other early stage companies have a relatively small pool of cash ( maybe a few million dollars) that will cover operating cash burn for maybe a year (at a tightly controlled rate) with an inevitable capital raise at some stage, LiveHire has cash reserves of about $34 million, 87% of total assets and 39% of market cap. This is very rare of a company of its size and stage of development. Importantly, it enables the company to invest heavily, and early, in sales and marketing and it is able to fund some 3 years of operating cash burn based on the FY 2019 level. In the normal course of events, this removes the expectation of a capital raise, which is great for investors who don’t have to live in fear of dilution as the company seeks a pathway to profitability.

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