Investment idea: LiveChat Software S.A. – Current cons. EPS growth from 2021/22E seems too low

Published 13/08/2020

Business description

LiveChat Software S.A. (; Market cap PLN 2.4bn/EUR 553m) is a Software-as-a-Service company that is based in Wroclaw/Poland. It is controlled by the founders & management (incl. CEO Mariusz Cieply), who own 47.1% of the company’s shares. Among  LiveChat’s (LVC) clients are companies from >150 countries, thereof >25 from the Fortune 500 list e.g. McDonalds’, Adobe, CBS, Comcast, PPG, PayPal.

The company’s by far most important product is Live Chat, which according to is No 3 worldwide (market share of 11%). It is a chat window for online communication between a customer and company’s representative with many additional functionalities incl. monitoring of website traffic and users’ actions, possibility to conduct and analyse transactions in the window, which is serviced by c. 30 LVC’s customer representatives. As of 5 June 2020, the number of clients of the Live Chat product reached >30,000 compared to 28,784 as of 31/03/2020 (end of fiscal-year 2019/20) and 26,379 at the end of March 2019. The ARPU of new clients has massively increased since the beginning of 2020 as customers have been choosing more expensive subscription models (currently, there are four different plans, which are payable monthly or yearly in USD).

While it has several other software products (Helpdesk, Knowledgebase etc.), the only one, which is currently generating meaningful results apart from Live Chat, is Chatbot. Chatbot allows AI-based text communication between a customer and a machine in various business scenarios (the machine has to be “trained” first). The product, which already has >1,100 clients (March 2019: 480), generated sales of PLN 2.3m in fiscal-year 2019/20 (2018/19: PLN 664k).


In 2019/20, which ended at the end of March 2020, LiveChat generated revenues of PLN 130.9m (+19.7% y-o-y), thereof 98% abroad and c. 47% in North America. The Live Chat product accounted for 98.2% of total sales. In 2017/18-2019/20, LVC’s revenues grew at a CAGR of 21%.

Compared to 2018/19, EBIT increased by 15.7% to PLN 81.9m (62.6% margin) and net income by 33% to PLN 76.1m (58.2% margin; CAGR 17/18-19/20 = 25.5%). As of 31/03/20, Free Cash Flow equaled PLN 58.3m (2018/19: PLN 50.6m) and net cash PLN 35.6m.

In Q1 2020/21 (ended in June 2020), LiveChat’s results were likely also very solid (full Q1 2020/21 report is due on August 28). Preliminary sales grew by 31.3% to USD 10.4m due to higher ARPU (both month-on-month and year-on-year) and number of users of Live Chat and Chatbot as well as a lower churn (in April 2020, customer churn temporarily went up to c. 4% vs. 3% previously).

Given its strong cash generation, LVC is able to pay a generous dividend to its shareholders. Between 2017/18 and 2019/20, DPS equaled PLN 1.77-PLN 2.48. In the last two years, the company paid out the dividend in three installments.


In our view, LiveChat will be among the main beneficiaries of the coronavirus pandemia, which increases the pressure at companies around the world to digitalize business processes and move them online. Moreover, due to the pandemia a significantly higher share of employees will likely work remotely most of the time in the future. In terms of products, for Chatbot the company assumes a similar (strong) growth trajectory than Live Chat had in the past. In addition, the weaker PLN vs. USD should support LVC’s results in the short term.

Because of the above, we believe that the current consensus EPS CAGR in 2020/21E-2022/23E of just 16.6% is too low, especially given the fact that in 2017/18-2019/20 (thus, before the pandemia and when LVC basically only had one product) it equaled 25.5%. For EPS 2020/21E, current CapitalIQ consensus implies a y-o-y growth of 36.3% vs. current P/E 2020/21E of 23.5x (Price-Earnings-Growth ratio of 0.65x).

The main risks, which we see, are an already strong performance of the stock YTD of 120.7% and LVC’s focus on text-based communication (in our view, speech-based bots are becoming increasingly important).

Disclaimer:  The author of this article owns shares of LiveChat himself

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