AmeriCrew Readies Stockholder Share Sale Plan (OTCMKTS:ACRU)

A Quick Take On AmeriCrew

AmeriCrew (OTC:ACRU) has filed to register for sale 2.93 million shares of common stock by selling shareholders, according to an S-1 registration statement.

The firm provides contracting services to telecom and clean energy firms in the U.S.

It’s difficult to get excited about the firm’s near-term prospects given its downward revenue trajectory.

Accordingly, my outlook on the shareholder sale is on Hold.

AmeriCrew Overview

Dumont, New Jersey-based AmeriCrew was founded to provide fiber construction and 5G wireless system construction work and EV charging station construction to companies located in the United States.

Management is headed by Chief Executive Officer P. Kelley Dunne, who has been with the firm since August 2021 and is currently the sole and Managing Member of Novation.

AmeriCrew has booked fair market value investment of $480,000 in equity and debt as of September 30, 2021 from investors including Novation Enterprises, P. Kelley Dunne and other individuals.

The firm seeks public and private telecom and EV charging station clients through its direct efforts.

AmeriCrew has also announced a training initiative in the EV charging system industry.

AmeriCrew’s Market & Competition

According to a 2021 market research report by Global Market Insights, the global market for telecommunications network infrastructure was an estimated $90 billion in 2020 and is forecast to reach $120 billion by 2027.

This represents a forecast CAGR of over 4% from 2021 to 2027.

The main drivers for this expected growth are a growing demand for 5G next generation services by consumers and businesses.

Also, the COVID-19 pandemic has increased demand pull-through due to increasing work-from-home considerations.

The specialty contracting services industry is a highly fragmented industry, including companies of all sizes, such as:

• MasTec (MTZ)

• Dycom Industries (DY)

• High Wire Networks (OTCQB:SGSID)

• Quanta Services (PWR)

AmeriCrew’s Financial Performance

The company’s recent financial results can be summarized as follows:

• Reduced topline revenue

• Lowered gross profit and gross margin

• A swing to operating loss

• Reduced cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Nine Mos. Ended September 30, 2021	$3,742,883	-8.9%
2020	$4,713,541	-14.1%
2019	$5,487,489
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Nine Mos. Ended September 30, 2021	$1,026,911	-23.0%
2020	$1,435,621	-14.5%
2019	$1,678,951
Gross Margin
Period	Gross Margin
Nine Mos. Ended September 30, 2021	27.44%
2020	30.46%
2019	30.60%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Nine Mos. Ended September 30, 2021	$ (827,086)	-22.1%
2020	$67,547	1.4%
2019	$342,863	6.2%
Net Income (Loss)
Period	Net Income (Loss)	Net Margin
Nine Mos. Ended September 30, 2021	$(507,396)	-13.6%
2020	$418,917	11.2%
2019	$342,863	9.2%
Cash Flow From Operations
Period	Cash Flow From Operations
Nine Mos. Ended September 30, 2021	$119,855
2020	$644,413
2019	$253,267
(Glossary Of Terms)

(Source)

As of September 30, 2021, AmeriCrew had $55,025 in cash and $2.5 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2021, was negative ($582,284).

AmeriCrew Registration Details

AmeriCrew is registering for sale 2.93 million shares of its common stock by selling shareholders at a reference price in the S-1 filing of $1.51 per share, although a more recent price was recorded on June 16, 2022 at $1.99 per share.

The company’s stock is currently quoted on the OTC Pink under the stock symbol “ACRU”.

No existing shareholders have indicated an interest to purchase shares in the offering.

Assuming a successful sale of all shares of the registration at $1.51 per share as referenced in the S-1 filing, the company’s enterprise value would approximate $28.3 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 15.7%. A figure under 10% is generally considered a ‘low float’ stock, which can be subject to significant price volatility.

All of the proceeds from the sale of stock will go to the selling shareholders, and the company will receive no proceeds from the offering. (Source)

Regarding outstanding legal proceedings, management said it isn’t aware of any legal proceedings that would have a material adverse effect on its financial condition or operations.

Valuation Metrics For AmeriCrew

Below is a table of relevant capitalization and valuation figures for the company:

Measure [TTM]	Amount
Market Capitalization at IPO	$28,229,595
Enterprise Value	$28,229,595
Price / Sales	6.49
EV / Revenue	6.49
EV / EBITDA	-24.47
Earnings Per Share	-$0.04
Operating Margin	-26.53%
Net Margin	-19.21%
Float To Outstanding Shares Ratio	15.68%
Reference Price per Share	$1.51
Net Free Cash Flow	-$582,284
Free Cash Flow Yield Per Share	-2.06%
Revenue Growth Rate	-8.89%
(Glossary Of Terms)

(Source)

Commentary About AmeriCrew’s Registration

ACRU is registering stockholder shares in this offering, which as far as I can tell does not include CEO P. Kelley Dunne or entities that he controls.

The list of selling shareholders is here.

The firm’s financials show lowered topline revenue, reduced gross profit and gross margin, a swing to operating loss and a drop in cash flow from operations.

Free cash flow for the twelve months ended September 30, 2021, was negative ($582,284).

The firm currently plans to pay no dividends on its shares for the foreseeable future.

The market opportunity for providing construction services to telecom firms is large and fragmented and expected to grow at a moderate rate of growth overall, although 5G-related construction may be elevated in the near term.

The primary risk to the company’s outlook is its pattern of sequentially lower revenue generation and a swing to net loss despite a growing industry.

As for valuation, if all shares are sold at the reference price of $1.51, the firm would have an Enterprise Value/Revenue multiple of 6.5x on contracting revenue.

It’s difficult to get excited about the firm’s near-term prospects given its downward revenue trajectory.

Accordingly, my outlook for the shareholder sale is on Hold.

Expected Share Sale Date: To be announced.