Software company LiveTiles (ASX: LVT) is continuing its expansive streak that has seen the Australian-born company experience exponential growth over the past year — including a high-profile switch to its New York headquarters and recording a 315% revenue growth rate earlier this year.
Earlier today, LiveTiles signed an agreement to fully acquire Hyperfish, a recognised leader in next-generation employee profile and directory management software.
Importantly for LiveTiles shareholders, is that the acquisition will be done in an all-share deal with “two earn-out tranches” set up to incentivise continued success from its development team.
LiveTiles has agreed to complete the deal by paying Hyperfish with 8.74 million LiveTiles shares, which equates to a base valuation of $3.66 million for the US tech company. The deal will also see current Hyperfish founders Brian Cook and Chris Johnson joining LiveTiles and continuing their development work.
The duo is expected to drive continued growth for the Hyperfish business unit and thereby create multiple synergies for LiveTiles as the parent company. It’s a deal that will take Hyperfish “to the next level,” according to Hyperfish co-founder Brian Cook.
Completion of the deal will mean that combined, LiveTiles and Hyperfish will service a customer base of over 500 organisations, providing an early opportunity to cross-sell to existing customers.
According to LiveTiles, Mr Cook and Mr Johnson are expected to deliver a “deep level of expertise in artificial intelligence and bot technology,” that will ultimately be added into LiveTiles’ range of products as part of an “intelligent workplace platform”.
Its current products include LiveTiles Bots, an intuitive web-based tool allowing users to create customizable virtual assistants that automate mundane and repetitive tasks and minimising human errors.
One of its most popular products is LiveTiles SharePoint, a tool that enables teams to connect disparate business apps in a centralised digital workplace, thereby generating a seamless experience across devices and between departments operating in different time zones.
Moving towards artificial intelligence
According to Hyperfish, the technology it provides is able to “bring an organisation’s employee directory to life” by ensuring directory and profile information is always complete and up-to-date.
The unique innovation underpinning Hyperfish is that its technology uses artificial intelligence to automatically identify missing or incorrect employee directory information. Its party trick is that it even initiates conversations with employees to collect and validate data.
The technology has been extensively tested and operates seamlessly including full compatibility with Microsoft Azure and Office 365 cloud platforms.
The AI element is potentially very lucrative because it effectively makes existing processes a lot more efficient and more accurate which “significantly improves workflow processes, approval processes and employee engagement,” according to LiveTiles.
Since a paid version of the Hyperfish software was launched in early 2017, Hyperfish has secured 33 customers and grown annualised recurring revenue to A$400,000 per year under a recurring subscription model.
According to financial records, Hyperfish’s run-rate operating expenses are approximately US$600,000 (A$800,000) per quarter — significantly higher than its annual revenue figures which likely means today’s announced deal comes at a superb time and will allow Hyperfish to thrive under the stewardship of LiveTiles.
LiveTiles is keen to roll out its very own AI capability that adds significant value to all its other products and entrenches its current advantage, gained largely from developing innovative solutions that streamline its customers’ workflow.
Its rationale is that by adding Hyperfish AI and bot capabilities (as well as recruiting the developers of such innovations), LiveTiles will greatly improve employee engagement and deliver commercially valuable efficiencies for large organisations.
Aside from the two companies participating in the deal (LiveTiles and Hyperfish), one other clear-cut winner is Microsoft, the giant US-based software company.
The software giant will see multiple products being provided to its global customer base, with AI-powered efficiencies now on the cards for implementation.
The acquisition of Hyperfish combines two of the fastest growing software companies in the Microsoft ecosystem with highly complementary products and rapid customer growth trajectories.
Earlier this year, LiveTiles signed up N3, a leading outsourced sales and marketing execution vendor for Microsoft’s Azure and Dynamics platforms. N3 also services a global client base which includes SAP, IBM and Cisco.
Hyperfish co-founders have developed deep relationships with Microsoft’s global executive team in Seattle over the past 15 years.
The addition of Hyperfish’s AI capabilities to LiveTiles’ offering is expected to further enhance both companies’ collaborative partnership with Microsoft and broadens their unified AI-powered solution that will be jointly promoted to Microsoft customers.
“Hyperfish will enable us to extend the LiveTiles intelligent workplace platform to deliver exciting new capabilities to current and future LiveTiles customers,” said Karl Redenbach, co-founder and CEO of LiveTiles.
LiveTiles shares were up around 2% by afternoon trade at $0.42 per share.