Centro Trims 4% Of Workforce To Sustain Tech Investments And Maintain Profitability

shawn-riegsecker-centro-Dec15Chicago-based ad platform company Centro let go 29 of its 725 employees on Monday, or about 4% of total staff.

Unlike other recent layoffs in the ad tech sector – including at Turn, Collective and PubMatic – the cuts were not motivated by a shrinking pool of cash, restless investors or slouching revenue growth. Instead, they happened because Centro wanted to remain profitable and focus on building its software business, according to CEO Shawn Riegsecker.

“We’ve run a profitable business each year, except 2008,” Riegsecker said. “Each year we ask, where do we need the biggest investment resources? Coming into 2016, we’re continuing to invest in sales and engineering resources.”

The cuts include some dedicated recruiters – less essential as the pace of hiring slows – as well as a central analytics team whose capabilities will be redistributed to satellite offices.

Centro also has consolidated its sales and services organization into a more simplified reporting structure, removing some layers of management. As part of that change, the previously segregated advertiser and publisher sales teams will be part of a single division.

But while profitability is a factor in the company’s light restructuring, it’s not the primary one.

“We’ve always managed our business to grow as fast as possible but also maintain profitability,” Riegsecker said. “Trust me, we don’t have hugely profitable years. In 2015, it could tip one way or the other; it’s single-digit on either side of the ledger. But that wasn’t as much of a driver as it was thinking about next year.”

While Riegsecker strongly resisted any comparison between Centro’s layoffs and recent cuts at other later-stage ad tech companies, he said the VC-funded digital ad sector overall has had to rationalize its overhead. That theme runs across most of the companies that have had to let employees go this year.

“A business by definition is selling something for more than it costs you to produce,” he said. “Anything else is just a hobby. We’re at a moment where all companies need to create a real business.”

Centro hired just under 400 people over the last two years, and acquired two companies: SiteScout, a self-service demand-side platform, and social marketing company GraphScience. Those businesses have helped diversify the company’s operations beyond the Centro Platform agency workflow solution and the Brand Exchange publisher network business.

Across those product units, Centro will manage $400 million in overall client spend this year, a figure that includes media costs that are passed on to publishers.

Cash on hand does not appear to be a problem. Centro has raised a total of $52 million, including a $30 million round in May of this year. Centro says it still has much of that investment money on hand and plans to spend it to extend its software licensing business – as opposed to managed services, which often deliver lower margins.

Riegsecker declined to comment on margin pressure or Centro’s revenue split between software and services, but he did say software is the company’s fastest-growing category.

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