Ackroo deserves a second look, says new CEO

Loyalty solution provider Ackroo (Ackroo Stock Quote, Chart, News: TSXV:AKR) stumbled out of the gate, but the company deserves a second look from investors, says its new CEO.

Steve Levely, who took the job last May, presented to a group of investors in Vancouver last week. The new boss detailed a journey he says has the company on the fast track to breaking even and eventually getting into the black. Levely has instituted aggressive cost cuts at the Ottawa-based company, and is forecasting revenue growth of 50% each year for the next three. It’s a long way from the large losses the company stacked up in 2012 and 2013.

Levely says Ackroo is now ready to play in a gift card and loyalty business that is worth $160-billion.

“We spent the last three year validating our business,” he explained. “We had to make little pivots along the way, but we are confident that we are on the right track now.”

Ackroo markets a solution that allows small and medium sized business to implement loyalty programs that can compete with national and international firms without breaking the bank. The company’s turnkey product integrates with existing point-of-sale equipment, and can enable a single card to act as both a loyalty program and a gift card.

To not have a sales team and still grow your business, that’s pretty damn good.

94% of households participate in at least one card-based loyalty program, and the industry has been slow to move from legacy solutions. Levely points out that paper-based loyalty programs and punch cards still make up part of the market.

To scale Ackroo to tackle the space, Levely says a fundamental rethink of the way the company sells was required. He fired the entire sales team last year to focus on building channel partnerships. The company has since signed reseller deals with Vancouver-based payment processing firm Kubera, Toronto-based payments solutions provider Everlink, and West Technology Group, which is based in St. Lucia.

Levely says that although the margins on channel partnerships are a bit lower, the overall result is better because a lot of big salaries come off the books. He expects Ackroo’s gross margins will top 70%, going forward.

“To not have a sales team and still grow your business, that’s pretty damn good,” he said.

The most challenging sales job, however, might have been convincing Ackroo’s existing investors to wipe the slate clean. In December, the company completed a ten-for-one share consolidation that left it with just over fifteen million shares outstanding. Hitting the reset button, points out Levely, puts a much more palatable product out to new investors looking at Ackroo. The company has no debt, has doubled its revenue since 2012, and expects to break even in fiscal 2015.

In a December “state of the union” press release Levely said 2015 would be a year of expansion.

“After spending the greater part of 2014 focused on reducing our operational costs, stabilizing our customer base, solidifying our strategic partnerships and updating our product and solution offerings, we now look forward to growing our business by executing our strategic plan,” he said.