Albert Tech to shutter indirect business as SaaS revenues rise

Albert Technologies updated the market on its software-as-a-service (SaaS) business, and confirmed its intention to cease trading in its indirect business by the end of 2017 on Tuesday, in light of what it called “growing momentum” and revenues in its core operations.

The AIM-traded firm said its core SaaS business was continuing its “rapid growth” with new contract wins and increased pipeline activity.

Its board said it expected to generate SaaS revenues of at least $1.7m for the year to 31 December, having achieved an annualised run-rate of more than $3m in the final quarter to date.

That revenue performance was ahead of the board’s initial expectations for 2017, and represented a ninefold increase over the previous year.

“We continue to be highly encouraged by the growth trajectory of our SaaS platform following significant new client wins during 2017, and growing revenue from our existing client base, as Albert proves its value in delivering enhanced performance as well as operating cost efficiencies,” the board said in its statement.

“The board believes that shareholder value will be maximized by investing the company's resource in its SaaS channel which is well positioned to meet growing structural demand for autonomous marketing solutions.”

As it had previously announced, the ecosystem in which the company’s indirect business operates had experienced “severe and prolonged” disruption from late 2015, the board said.

Advertising exchanges reduced their inventory levels, many exchanges consolidated or merged and, in parallel, the market started to shift from using open exchanges to private and self-serve exchanges.

That disruption resulted in loss of supply for major online advertising exchanges and a loss of demand from major media buyers, the result of which was a “dramatic decrease” in transaction volumes and significant pressure on margins in the industry.

“The company has sought to minimise the impact of disruptions described above, including working to diversify its partnerships and customer base, however the indirect business became unprofitable in the first half of 2017 for the first time and the market in which it operates remains extremely volatile,” the board explained.

“Conversely, the company's core SaaS business is gaining momentum and is not subject to the pressures described above as revenues from this business are based on tier levels of the software usage and not on utilising opportunities for gains from trading activity.”

The board said it therefore believed it would be in the best interests of shareholders to cease the indirect business by the end of 2017, in order to focus its efforts and resources solely on its SaaS business and reduce the losses of the company.

There was expected to be no material net costs associated with the closure, and the intellectual property utilised by the indirect business will remain under the direct ownership of the company.

“Witnessing the changes in the past two years in the industry, we are confident in the strategic change we are making,” said Albert Technologies CEO Or Shani.

“Having positioned our AI platform at the forefront of the industry, we will now be able to better support and focus on enhancing our fast-scaling SaaS business.”