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Microcap & Penny Stocks : Microcap Kitchen Canadian Stocks

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From: WorthaDeeperLook	1/7/2019 2:41:12 PM
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AKR.v - Ackroo Inc. The addition of Jason Donville to the board of directors has made me more confident than ever in Ackroo's acquisition strategy. His capital allocation skills should pair nicely with CEO Steve Levely's vision and ability to run a lean operation. There are big trends happening in POS, payment and e-commerce. Ackroo isn't trying to reinvent the wheel and position itself as an innovator, it is taking a low-risk approach to rolling up revenue, technology and talent. Churn rate is only 3% (as other competitors in the space), so don't expect big things from organic growth even though Ackroo's product platform is evolving quite nicely, notably with the Clover Flex integration (first time they have a true self-service offering). Ackroo should finish 2018 around 4.5M$ in revenue and 450k$ in EBITDA. They guided higher at the beginning of the year because Steve factored in a potentiel acquisition in Q4. That didn't happen and I don't think a big acquisition will happen in the next 3-6 months. Board has decided to take a more patient approach with the addition of Jason to make sure the next one is an homerun. That said, I would still like to see 2-3 small tuck-in acquisitions... M&A acquisition strategy had great economics in the marketing software space. Ackroo can acquire smaller competitors at 1-3x revenue with 50% of sales flowing to the EBITDA line. High margin, highly recurring revenue with low churn rate. Why is it so cheap? Their competitors are so small to get to scale where S&M and support costs generate high operating leverage. What's great? They are many of them in this situation, looking for an exit. 2019 - Management has told me they believe they can cut another 500k$ in costs related to their Loyalmark Acquisition. Add 10% organic growth and without contribution from potential acquisitions, I see 5M$ and around 1M$ in EBITDA in my base case scenario. The company is currently trading at a fwd EV/EBITDA ratio of ~8x in its first year as a cash flow positive company with significant operating leverage as they grow bigger. I've never been more bullish on Ackroo than today.

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