LiveChat Software S.A

LiveChat (LVC) is a global provider and developer of ‘Live Chat’ related software that is sold in the SaaS model for B2C and B2B communications. The company has a portfolio of products that are designed to improve the quality and efficiency communication between the customer and the business.

LVC have 4 products, the core product being ‘Live Chat’. Live Chat is a chat application that is white labelled for a company’s website allowing them to manage customer support and sales online.

LVC’s products are designed to replace incumbent, expensive and inefficient methods of sales and support, currently provided by telephone or email. According to Forester, live chat services are 17-30% cheaper than a phone call (Forrester Research, 2019) and can drive 3-5x more conversions than tele-sales. In some cases, ROI’s can exceed 6000% for the client.

 LVC have over 27,000 customers ranging from SME’s to large enterprise clients such as McDonalds, PayPal and Samsung.


LVC have a business model and roadmap designed to outperform an already fast-growing market. MEL believes their business model is favourable. Their products are highly scalable as businesses can be onboarded quickly, and their SaaS sales model creates a high level of visibility and predictability. Their diversified client base means they do not have a reliance on a specific sector or large client.

LVC use a simple marketing strategy that comprises of only SEO, affiliate marketing and partnership programs. The strategy is designed to be low cost as the business pays for marketing on a ‘success only’ basis. Live Chat also owns the domain which allows for efficient search engine rankings. This marketing strategy has helped LVC achieve industry leading operating margins of 67% with marketing spend representing only 9% of sales as an average over the past 5 years.

The business plans to grow through several verticals including;

  1. Increasing customers numbers through building more partnerships, developing the affiliate program, improving brand presence, and increasing penetration globally.  Tele-sales/services remain the most widely used method of support as penetration of Live Chat services is still in its infancy. This provides an opportunity for significant long-term growth.
  2. Upselling/Cross-selling. LVC have demonstrated an ability to consistently develop and sell new products to their existing clients. This has been a driver of consistent increases in ARPU.
  3. Increasing prices. LVC have improved clients ROI’s, which has allowed for price increases without increasing churn.


LiveChat provide two KPI’s; Clients and average revenue per client (ARPC). LVC have achieved healthy growth in both categories over an extended period.

This has correlated to extremely strong and robust financial performance, placing it in the top decile on the MEL Quality rank. Their strong operational performance has generated 42% Revenue CAGR, 43% PBT CAGR, 105% ROA and 2-3% dividend yield over the past 5 years. MEL expect strong future performance due to low penetration in the market, effective marketing, and failings in the incumbent tele/email support industry.

Amongst the top 1 million largest websites, LVC has 11% market share. The largest competitor is ZenDesk who holds a 27% market share, followed by several other companies with 7-15% market shares. Many of LVC’s competitors are large USA businesses with significant financial backing from investors. These businesses tend to also be growing strongly, but have live chat products as a product within a larger CRM offering rather than a sole focus.

Due to the structural drivers, several of the businesses in this category have achieved high double-digit growth, meaning the market is unlikely to be a zero-sum game. Unlike other competitors, LVC are growing their revenues while generating profits.  Most competitors are focussed on growing their top line at the expense of generating profit, often meaning persistent share issuance, diluting investor returns.

LVC have taken an approach to minimise the external costs of acquiring new customers and focus on maintained profitability of operations. This business model has allowed sustainable growth, high levels of cash generation, no debt, no share issuance, and the ability to pay a healthy dividend. MEL believe this is a safer business model and gives management levers to pull if the market environment changes due to their healthy balance sheet.

Middleton Enterprises believes this is a strong long opportunity for growth investors.

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