Tech small-cap Livetiles Ltd (ASX: LVT) has been on a tear over the past week. After a period of significant underperformance, its share price has rebounded strongly, finishing the week up almost 40% to $0.34. That's a pretty stunning turnaround for a company that only recently saw its shares plunge to a new 52-week-low of $0.235.
What is driving the recovery?
For those unfamiliar with LiveTiles, it is a software company that specialises in creating intranet portals for corporate clients. The company aims to use developing technologies like machine learning and artificial intelligence to create collaborative online working environments – turning staid old company intranet portals into highly integrated, engaging and creative online workspaces.
And it has caught the attention of tech juggernaut Microsoft in the United States (US). LiveTiles' core software is capable of being deployed with Microsoft's communication and collaboration platform, Microsoft Teams, and the 2 companies have been involved in co-selling initiatives in at least 39 countries as a result.
This arrangement delivered a big win for LiveTiles last week. The company announced it was approved for co-sell with Microsoft into the US Government, meaning that LiveTiles is now an approved vendor across US Federal government agencies. It also gives the LiveTiles the ability to pursue partnership opportunities with Microsoft in its recently announced $14.6 billion cloud contract with the US Department of Defense. According to the LiveTiles announcement, the US Federal Government is the largest purchaser of IT products in the world, and it is projected to spend over $127 billion on IT in 2020 alone.
As well as announcing its new arrangement with the US Government, LiveTiles also delivered some strong results for the December quarter last week. Annualised recurring revenues jumped over 20% quarter-on-quarter to $52.7 million, with roughly half of the uplift coming from organic growth and the other half via Swiss software company CYCL, which LiveTiles acquired in December.
Foolish takeaway
Although it seems to still be flying under the radar for a lot of investors, LiveTiles is beginning to gather some real momentum. The company's organic growth numbers have been consistently strong, and it has augmented its underlying performance through a number of successful strategic acquisitions over the last couple of years. Add to that the potential increased pipeline from its new agreement with the US Government and possible further opportunities through its partnership with Microsoft and it makes for an exciting investment proposition. Plus, LiveTiles' share price is hovering around historic lows, so even despite its resurgence last week it still seems cheap.
That's not to say there isn't risk associated with an investment in LiveTiles: it is a young company operating in a pretty fickle tech space. There is always the threat that a tech company with greater financial resources at its disposal could come along and develop a more attractive product. But right now, LiveTiles is performing strongly and laying a solid foundation for future success.
For those investors interested in the software and IT sector, LiveTiles is definitely one to watch for 2020, alongside other growing tech stocks like Dubber Corp Ltd (ASX: DUB) and ELMO Software Ltd (ASX: ELO).
