Ackroo: Q2 and rest of 2015

Ackroo recently announced Q2 numbers. The market reacted violently, sending the shares down 20%. Although if you read the M&A and know the story with this company, then you would be happy with the results and excited for the second half of 2015.

  • The company reported a 10% growth on Y-o-Y. Although this is not something to be proud off, but the subscription revenue grew by 14%. Now this might not look superb either but remember this is achieved with almost no sales team. Also we know this is achieved while the company was focused on integrating the 2 acquisitions. In light of these items, this is really good growth.
  • The management team mentioned that they expect the 2 acquisitions to provide over 200K of revenue in Q3. This is a big deal as it gets the company closer to its 2015 goal. The company can be expected to do over 550K of revenue in Q3.
  • The company is currently around low-600k for breakeven. So we can be close in Q3 and definitely be breakeven or profitable in Q4.
  • The management still expects to do 2M in revenue in 2015. They have done around 650K in the first 2 quarters. That is a run-rate of 700K for the second half. That would be a profitable second half.
  • Management is expecting to do another acquisition in 2015. Clearly management is feeling confident with having the correct operations to acquire and integrate acquisitions. This bodes well for 2016, when they will likely be able to get a line of credit to expand.
  • Everlink, their reseller, is now up and running. Infact they got their first customer from this reseller in Q2. We should slowly start seeing more customers from this reseller. Everlink is a huge account for Ackroo, so management is doing the smart thing of slowly working with them to ensure they have a streamlined process to work with resellers.

It is amazing how quickly this company is moving. The new CEO joined the company only over a year ago. He took the helm when the company had no cash and a bloated cost structure. Since then, he has fixed the operations and took care of the cash issue. Now we are finally starting to see the growth in the revenue side. I think once he is able to get the operations to be profitable then we will finally start seeing the leverage in this business model. For all that this management team has done in the past year, the stock has not moved much. There is a big concern of delivering on the $600K of cash payment in December. With the warrants that will bring it about $2M in cash by January, I think management has enough cash for the big payment and to do another acquisition.


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