Adgorithms performs as expected with 'land-and-expand' strategy

Adgorithms announced a trading update for the year to 31 December on Wednesday, saying it continued to execute its stated growth strategy, and expected trading for the year to be in line with management's expectations.

The AIM-traded company said its unaudited revenue for the period was expected to be approximately $16m, with an unaudited adjusted EBITDA loss of around $8m.

It said the cash balance as of 31 December was expected to be about $22m, reflecting the firm's focus on controlling cash burn.

“The company is pleased to report progress in the adoption of Albert 2.0, a pioneering AI based software-as-a-service marketing platform,” the board said in a statement.

“The platform, which is central to the company's direct SaaS deployment strategy, continues to show good market acceptance.

“This has been supported by the company's expanded operational presence in the US, which now totals 15 people.”

As a result, Adgorithms said it was continuing to develop a “good pipeline” of new business opportunities, in line with its internal projections, reportedly including some well-known brands.

“We recently won a 12-month contract with a multibillion dollar global food distribution company in the Philippines.

“This reflects our ‘land-and-expand’ strategy whereby we aim to secure a contract to run a portion of the online media budget for a customer in a territory and then expand both to additional sub-brands within the territory and globally with that brand customer, after proving the technology in our first territory of operation.”

Adgorithms said that customer elected to work with them, instead of a traditional online advertising agency, which it believed further confirmed the trend of brands using Albert to take control of their media buying whilst boosting return on investment.

“Initial SaaS revenue from this contract in 2017 is expected to be $0.08m for three sub-brands of this global customer in the Philippines.

“SaaS currently represents a small but growing proportion of overall revenues and is expected to become increasingly meaningful over time.”

Adgorithms said its indirect trading business, which focuses on leveraging undervalued inventory on online advertising exchanges, continued to be volatile and challenging.

“This division is now led by two industry veterans and has continued in its effort to diversify the business and explore new growth opportunities.

“The company's board of directors remain confident in the overall long term growth prospects of the business.