AKR - Ackroo

[oddballstocks]

I think you are reading more significance into the partner than than is merited.  You can become a partner by paying for partnership access.  First Data didn't dedicate months to validating Akroo's tech.  They made sure Akroo could jump through some hoops, ensured the check cleared and that was it.

 

These partnership things are all over in business.  Execs tout them and they all come to nothing.  They're not as important as people want them to be.  The First Data reps aren't going to focus on Akroo anymore than any of the hundreds of other partners they have.  First Data has a partnership enrollment form on their website.

 

This is like a company saying "We've partnered with Apple and Google to get our app in their stores.  Our application will now have unprecedented visibility from the two largest players in the app market."

 

Maybe it will be different for these guys, but I suspect not.  Rarely do partnerships or channel opportunities amount to anything substantial, or anything at all. 

[unusualstocks]

http://www.unusualstocks.net/members-only/2016/6/10/qa-regarding-the-ackroo-and-first-data-partnership

 

Earlier this week Ackroo announced a highly strategic partnership with First Data Canada, a subsidiary of First Data Corporation, the largest payment provider in the world in terms of merchant locations (6M+ locations), having the biggest market share in the USA at around 55% of all merchant locations. This is a significant milestone for the company, and a very unique one, as it is not everyday you hear about a $12B+ market cap company selecting to partner with a $3M market cap company.

 

I have received some very good questions from investors regarding the partnership and I thought I would address them here for all to see. These answers are based on some high level discussions with Steve Levely (CEO) as well as some independent research and discussions with some people that are very familiar with First Data and this industry in general.

 

Question: First Data has all kinds of solutions for small businesses with loyalty programs/management and gift cards being only one of their offerings. What kind of incentives are there for First Data Canada in ''pushing'' AKR's solution vs the dozen or so solutions First Data is currently offering?

 

Answer: There are a few answers to this question that I believe are important to understand:

 

1) If this relationship works like similar ones, the First Data sales reps are paid a one-time commission for the referral and First Data makes a commission on Ackroo's processing fees.  So there is a financial gain to First Data.

 

2) It is my understanding that First Data is losing merchant accounts in Canada. As a result they are very likely looking (just an assumption of mine as I would be looking too) to move their core customers to Ackroo in an effort to keep those customers in their merchant network.

 

3) When payment processors sell gift card and loyalty products, statistics show merchants stay 2 years longer with the processor.  Given this, it becomes very important for a company like First Data to partner with a company such as Ackroo who has a very high customer retention rate (90%+).

 

4) In order for First Data to win many new merchant accounts they are looking to differentiate and aligning with a robust and affordable gift card and loyalty provider like Ackroo makes it easier for them to close the deals.

 

5) To win business from the competition (like Moneris and others) who have their own gift card and loyalty platform First Data needs a 3rd party provider like Ackroo to import the competitive card #’s and balances into Ackroo's platform so that the consumers are not affected and they can continue to use the current cards.

 

Question: Why should we expect Ackroo to have success penetrating First Data's Canadian merchant locations when they have such small current penetration in their existing payment processors (Global and Chase) current network? (FYI...as a reference point Ackroo has about 250,000 merchant locations available to them within the networks of current partners Chase and Global Payments, of which they are in 1,200 or so at this time-- approx. 400 of those 1,200 locations are with various other processors using Ackroo's system through direct integration to their POS software or AKR virtual terminals).

 

Answer: Currently First Data has only two partners in Canada, now Ackroo being one of them. Based on some conversations I have had with some people close to First Data, they are having some issues with their current partner so it is possible that eventually First Data will only work with Ackroo (again, a BIG assumption on my part). Another reason why it's very important for Ackroo to deliver in the early innings of this relationship.

 

To put this in perspective, Chase has 3 partners and Global has 5 partners in the space (making the penetration into Ackroo's potential merchant locations a bit more challenging) so effectively Ackroo will be only one of two current Canadian partners for First Data...and hopefully eventually the only one.

 

Question: What does this initial partnership with First Data Canada mean in terms of the future potential for the partnership to expand into First Data's USA's 4M potential merchant locations? How quickly could this potentially happen?

 

Answer: A very conservative response to this question would be that a transition into the USA with First Data would be a mid-2017 event. However, I suspect the first 3-4 months of the partnership will dictate what this potential US expansion timeline may look like. I would anticipate that Ackroo, outside of its First Data relationship, would begin entering the US market aggressively in late 2016, leveraging the relationships it is currently building with some of it's Canadian customers with US operations (i.e. Perkins test in Canada...could it roll out in the USA to all locations?)

 

[unusualstocks]

Q2 2016 Results were fantastic. 77% YoY growth, with roughly 30% of that growth being organic.

 

http://finance.yahoo.com/news/ackroo-announces-q2-2016-financial-120000830.html

[gary17]

Q2 2016 Results were fantastic. 77% YoY growth, with roughly 30% of that growth being organic.

 

http://finance.yahoo.com/news/ackroo-announces-q2-2016-financial-120000830.html

 

At this rate of growth we probably see profitability in 2 years?

$50 in the bank account

and CEO hasn't paid into the warrants he exercised.

I can see while the company has try hard why the market continues to not be impressed. 

I wouldn't hold 50% of my portfolio here -

[Guest Schwab711]

Sales and marketing budget was a whopping CAD 53 this quarter. That's roughly $40-$41. This is a joke. That works out to about 1,500 low-quality business cards OR a business lunch at McDonald's. How did they get their partnership with First Data on this budget!?

 

Did they stop paying salaries? I'm somewhat joking but they made numerous acquisitions and SG&A is down on the year?

 

Finally, is the A/R figures off? BS and CFS don't jive.

 

I see nothing positive in this report

[unusualstocks]

Tough crowd  :-X

 

 

 

[gary17]

if AKR is truly the wonderful business you say it is - why is it not trading at 10x revenue?

 

Market is not always efficient - agreed - but most of the time it is efficient. 

 

Why was it so hard to raise money?

 

Why not many people exercised the warrants at 0.25$?

 

Good luck

[unusualstocks]

Ackroo is a tiny microcap company. That cannot be lost in the conversation. If everything were rosy it would be trading at 10x revenues, you are right. It takes vision to see a potential runway for the company. I see it, it is ok if you or others don't. That is what makes investing...investing.

 

A huge mistake the CEO has made, in my opinion, has been in providing guidance. It is stupid to do so as such a small company (and perhaps as any size company). It has crashed and burned him, and rightfully so investors like @parasd have seemingly lost trust in him because of his inability to hit some of his previous guidance forecasts. Last year's revenues didn't hit $2M as he hoped, and it looks like profitability and positive cash flow may come in Q4, over a year later from his initial guidance on this front. Ouch! Perhaps the biggest mistake Steve made was buying a company before having the cash to do so. This literally could have brought Ackroo down. Based on a good relationship between Steve and the DRC owner, the re-negotiation of the terms has been fairly simple for Ackroo to do. Plus, without Ackroo around DRC would get nothing as they are not a secured creditor to the company. But, this absolutely could have been a nail in the coffin for Ackroo. It felt good to see Ackroo be able to make a $350k payment to DRC in June, with the next payment not due again until January 2017.

 

Personally, I like a CEO who is nimble and flexible and can accept defeat when it happens in terms of a particular business strategy. When Steve tried to implement a reseller model he bailed on it a short 6 months or so later as it was more challenging than he thought. I would rather that happen instead of seeing him still using resources and money to try figure it out. Of course, the biggest challenge for the company has been a lack of cash. Many investors will say "ya, what an excuse"...but it is a fact. Cash can accelerate any business if allocated correctly, and I hope that the company gets to a position via free cash flows that we get to see how successful Steve can be at reinvesting cash into the business. One thing is for certain, despite the cash limitations Steve has been able to do a lot of good. This number is a very rough guess on my end but over the past 12 months Steve has been able to make just $300-400k in available cash (cash not allocated to debt payments, DRC licesning fees, etc) go a long way, with 30% organic growth in Q2 2016 over Q2 2015.

 

But for anyone suggest that the business model for Ackroo is not working would be making a factually incorrect statement. Gross margins of 65% have been steady, expenses and operating costs continue to decrease, client retention is still very high, and Monthly Recurring Revenue (MRR) per location has still been hovering near $100/month. No signs of any real wekness in the business to speak of, except the continued lack of cash.

 

FY 2016, after 2 quarters, is showing revenues of over $1.1M. If the effects of the First Data Canada deal, as well as the addition of Quickservice  as a partner, start to surface in Q3 and Q4 like I hope they will, I think $2.5M or higher is not out of reach for full year 2016. At such number, I feel pretty confident the company would be generating free cash flows and would be profitable.

 

See attached for a nice snapshot of the company's progress over the past few years.

 

 

[unusualstocks]

Great article just published written by Todd at AlphaTree Group:

 

http://alphatreegroup.com/blog-post/ackroo-busted-unicorn-verge-multi-bagger-status/

[unusualstocks]

https://finance.yahoo.com/news/ackroo-closes-private-placement-ackroo-130000940.html

 

Ackroo Closes Private Placement - Ackroo subscribes the full offering, adding $1,000,000 to fuel the next phases of growth

 

PR Newswire PR NewswireNovember 18, 2016Comment

OTTAWA, Nov. 18, 2016 /CNW/ - Ackroo Inc. (TSX-V: AKR; OTC: AKRFF) ("Ackroo" or the "Company"), a gift card, loyalty and rewards technology and services provider, today announced it has closed a private placement for gross proceeds of $1,000,000.  In connection with closing, the Company issued 5,000,000 common shares to subscribers at a price of $0.20 per share and 2,500,000 common share purchase warrants.  Each common share purchase warrant entitles subscribers to purchase one additional common share of the Company at a price of $0.30 per share for a period of 24 months from the date of issuance.  The warrants are subject to accelerated expiry in the event the Company's shares close at $0.40 or more for 10 consecutive trading days.  In conjunction with the placement the Company has paid $14,940 and issued 67,200 common share purchase warrants as a commission to finder's who have introduced qualified investors to the Company.  The finders' warrants are exercisable on the same terms as the private placement warrants.  All securities issued on closing of the private placement are subject to a four month and a day hold period.

 

"This financing was key to our next phases of growth" said Steve Levely, chief executive officer at Ackroo. "The funds allow us to support our working capital requirements while also providing us with additional funds to hire more staff back into the Company to position us for scale.  Our hiring plan has us adding staff into sales, marketing and product development which will allow the Company to better support our general operations, our channel partners and our current and prospective acquisitions.  As we begin to create more departmental focus and improve on our ability to execute, these additional hires play a key role in our success.  We believe not only will the additional staff assist us with closing the final gap of our operating losses, these individuals will help solidify our employee baseline so that we can continue to execute on our organic and inorganic growth plans and begin scaling the business further.  An exciting win for the Company, our customers and for our shareholders."

 

In addition, Ackroo has granted options to purchase 235,000 common shares to officers, employees and consultants of the Company at a price of $0.20, for a period of 3 years.  The grant is subject to the approval of the TSX Venture Exchange.

[oddballstocks]

What's the business plan here?  Keep raising money from shareholders while talking about "growth"?  Seems like the only news is diluting shareholders and raising more cash.

 

Shareholders stuck in a dog like this get pulled into a vicious cycle.  Either participate in each new round or be diluted to nothing.

[unusualstocks]

Interesting response, Nate. The company just completed this raise and gets $1M cash on the balance sheet to deploy. This is the 3rd raise in 2 years, and the last one before breakeven occurs later in Q4 or Q1. The company has less than 30M fully diluted shares. My personal opinion is there will be no more dilution-- future growth capital will be achieved via debt I would hope.

 

I am not sure I understand what you mean by "what's the business plan here?" It has been well documented and discussed many places. My previous post with the article by AlphaTree Group is a good one.

[unusualstocks]

A recent business win announced by Ackroo. By my estimations this adds about $100k in annual recurring revenues. They now work with roughly 10% of the Canadian auto dealer market.

 

http://www.newswire.ca/news-releases/ackroo-adds-300th-automotive-dealership---ackroo-further-expands-its-client-portfolio-with-additional-20-location-dealer-group-605610516.html