I just attended Ackroo's investor presentation in Montreal and also spoke 1x1 with the CEO Steve Levely. This was my second time meeting him in person, but I do exchange with regularly via email and phone. I learned a great deal more about the company tonight and I will share it in bullet point form below for you guys. Before I start, I think the month of October could be a fantastic entry point or an opportunity to pick up some cheap shares for anyone who hasn't initiated a position yet or is looking to add to their position. While I normally don't advocate trying to time buys and sells, in this case, the probably of a decline occurring are high. There are 1M escrow shares which belong to the owners of the old mining company before it acquired Ackroo (remember: Ackroo went public via an RTO in 2012) that will become free trading on the 1st of October. I've been told they will be selling it all and it makes sense given that they were initially invested in a mining company, yet now they own stock in a technology company they know nothing about and don't care for. So depending on how quickly they unload their shares, they could bring down the stock price... Ackroo is a relatively thinly traded stock with an average daily volume of 40k shares.
- Should have 1,200 locations by end of September. That doesn't include the 500 locations from PhotoGIFTCARD.
- Steve literately has acquisition talks every week so he's completely set on the roll-up strategy as I previously discussed in my Corporate Update post.
- Q3 will not be breakeven but should come close. Unfortunately, there will be some one-time expenses, such as the OTC Pink Sheet uplisting which was $25k and a new billing system which I do not know the cost. That being said, Q3 will still be their "best quarter yet" to quote him. We already knew that since he said that the DealerRewards acquisition would add in excess of $200k per quarter starting Q3.
- He's still confident Q4 will be cash flow profitable (not EPS profitable). If it's not Q4, then he saying Q1 2016 for sure.
- Looking to close another acquisition prior to year end. He is currently in talks with one company whose owner is eager to sell quickly as he's in 60s and is looking for an exit. The beautiful part about that is Steve thinks he can get him to accept getting paid in installments over the course of a few years. This would allow Steve to pay off the vendor with profits generated by the company in years to come instead of needing to raise capital and dilute shareholders (dilution is obviously an investor's #1 enemy).
- Will eventually need to raise capital to continue with roll-up strategy, preferably via an equity raise. The minimum price he would do a raise at is ~$0.50/share. If the stock doesn't get there, which I don't see why it wouldn't if he delivers on Q3 and Q4, then he would take on debt -- that's not a problem so long as he gets favorable interest rates.
- Confirmed the reseller strategy isn't working as well as he thought. I asked him if he could turn back the clock would he do it over again? He answered he would just make them referral partners. His change of strategy doesn't concern me the least bit because in business one must always be willing to adapt or they will eventually fail. The important part about trying new initiatives is to cut your losses quickly if you see signs of failure and immediately move on to another strategy -- exactly what Steve has done here.
- Referral partners still going well. He's trying to get more and more leads from them. He closes about 25% of the leads they send to him.
- Ackroo is a developing a mobile application that they will white label to their customers. The company has found that the bulk of their customers don't have their own mobile applications for their company. Hence, they will be able to pay Ackroo a one-time fee to use their application and brand it as their own. This will be ready in early 2016 and a PR will be out about it sometime in January.
- The current lifetime value of a customer (LTV) is $6656 (note: average customer life is around 10 years -- 1/90% retention rate = 10 years) and the customer acquisition cost (CAQ) is $1000-1500 as per the new investor presentation. To anyone familiar with SaaS companies and the metrics used to evaluate them, these numbers are solid. Furthermore, Steve believes he can get the CAQ below $1000 in the near future.
- Steve has commitments to exercise at least $600k worth of warrants from investors, even at current prices in order to protect their investment & help the company, and already 400k of the warrants have been exercised so far. He should no issue making the $600k payment to the vendor of DealerRewards at the year end. In the case where he would not raise the full amount, the vendor would be more than accommodating a delay in payment, however Steve would be forced to give him an additional $50k -- not a major issue. That would be a good thing for new shareholders though since less warrants being exercised equates to less dilution.
Link to new investor presentation:
To recap, I personally would wait till early October to pick up some cheap shares. I think with the imminent catalysts -- Q3 showing strong top line growth and reduced losses, Q4 showing positive cash flow and Ackroo making another acquisition without dilution prior to the year end -- the stock should move up considerably. It could take a while however since the 4th quarter results would only be released at the end of March. When it does happen, the CEO will be able to perform another raise for the remainder of the capital needed to pursue his roll-up strategy. And so further share price appreciation could be made possible after that.