Faithlife Financially: "What condition is your condition is in?"

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Posts 235
C M | Forum Activity | Posted: Mon, Nov 23 2015 3:36 PM

I saw remarks on a recent thread in reference to Faithlife financial situation. I and others are considering investing more in the Logos Bible Software Product. Is Faithlife financially sound? I am not asking just to be mean or to alarm anyone unduly, but to give this matter a proper airing. No one wants to come aboard a sinking ship. This inquiry is a fair question for any reasonable, responsible, Christian steward. Things can happen very fast in the times in which we are living. Not withstanding, it pays (always) for one to do his or her homework before investing heavily in a product. Hey, if "big banks" can fail, how much more, we are to inquire of smaller companies?  It's always "better to be safe, than to be sorry." 

I really would like to hear from Bob or those who really knows. Or from those who don't know for sure, but have been reassured and their reasons for being assured. The changes in the payment plans help drives this inquiry for others. Let the truth be spoken and "let the chips fall where they may." Any factional information will be appreciated. If this information is posted somewhere or on another website, please direct me to it.

MVPs and employees are welcome to contribute to this thread. Truth doesn't need lawyers, just witnesses.

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JT (alabama24) | Forum Activity | Replied: Mon, Nov 23 2015 3:42 PM

Charles McNeil:
I really would like to hear from Bob or those who really knows.

Search for posts from Bob. He has answered this question recently... probably in the same thread(s) you referenced above.

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JRS | Forum Activity | Replied: Mon, Nov 23 2015 3:42 PM

The question has been asked and responded to on several occasions.  Might I direct you to https://wiki.logos.com/Logos_Speaks for some past answers?  In particular, note the section called Company Information.

How blessed is the one whom Thou dost choose, and bring near to Thee(Psa 65:4a)

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John Goodman | Forum Activity | Replied: Mon, Nov 23 2015 3:53 PM

As a private company in the US I don't think their financials are public info... You are probably limited to press release info... Bob has posted before info about what happens if they go out of business in terms of your books. You still have them downloaded. They are probably too big to go out of business without simply being purchased. Also you could send books to kindle etc.

There are good signs of life though... new products, hirings etc.

Hope that helps.

גַּם־חֹשֶׁךְ֮ לֹֽא־יַחְשִׁ֪יךְ מִ֫מֶּ֥ךָ וְ֭לַיְלָה כַּיּ֣וֹם יָאִ֑יר כַּ֝חֲשֵׁיכָ֗ה כָּאוֹרָֽה

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Mark Barnes | Forum Activity | Replied: Mon, Nov 23 2015 3:56 PM

Charles McNeil:
I really would like to hear from Bob or those who really knows.

As has been said, Bob's already answered that in the thread you referred to.

Bob Pritchett:

We're not in any danger of disappearing. We're a significant business with a wonderful, active customer base (thank you!) that still makes a profit…

For what it's worth, we are both profitable and growing this year. We're just tweaking our payment plan system so that we can continue to serve you well without having to borrow future receivables from someone we meet in the alley behind the dumpster. :-)

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Bruce Dunning | Forum Activity | Replied: Mon, Nov 23 2015 4:12 PM

I hope that the above has answered your questions which have also been addressed a number of times over the years. For me personally I'm confident in the future of Faithlife and will continue to invest in Faithlife resources.

Using adventure and community to challenge young people to continually say "yes" to God

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Don Awalt | Forum Activity | Replied: Mon, Nov 23 2015 4:20 PM

I may be way off base and no one talks to me, but IMHO it sounds like a company cleaning up its financials to prepare for an IPO, which will have new challenges and benefits if true but it's certaibly an indicator of good health not bad. 

It could also just be prudent decision making, giving Bob the benefit of the doubt that his remarks were true :-)

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Jack Caviness | Forum Activity | Replied: Tue, Nov 24 2015 5:04 AM

Bob is willing to try new projects, and he is not afraid to abandon one that does not work as expected. I think that factors into this change. The previous very flexible payment plan system was not really wise from a cash-flow perspective. Therefore, FL made a wise decision to change the system.

Unfortunately, communication is not FL's strong suit. While the change was probably necessary, the abruptness of its implementation and the really, really bad way in which was communicated gives some the impression of financial difficulties. FL has never done a decent job of communication, and I frankly see no attempt to improve on that abysmal record.

Bottom line—Not financial insolvency, but rather lousy communication.

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GregW | Forum Activity | Replied: Tue, Nov 24 2015 7:22 AM

Don Awalt:

I may be way off base and no one talks to me, but IMHO it sounds like a company cleaning up its financials to prepare for an IPO, which will have new challenges and benefits if true but it's certaibly an indicator of good health not bad. 

I'll talk to you Don!

I read things slightly differently but agree with you that what we are seeing are signs of health. I think that the moves we've seen on subscriptions and payment plans are good examples of looking ahead, seeing the challenges that lie in the future, and putting things in place to meet those challenges. I'm not qualified to comment on whether there is an IPO on the way, but the fact that Bob is prepared to make some difficult changes to face the challenges he sees coming down the tracks is one that gives me confidence in FL's future. 

If Fl were in trouble, I suspect we'd be seeing a hiring freeze followed by some fairly substantial layoffs as the first indicators of that, and there is no sign of that happening. On the contrary, we are seeing continued hiring and investment in the products.


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Dan Francis | Forum Activity | Replied: Tue, Nov 24 2015 12:28 PM

I have no idea if an IPO would ever come nor do I have any significant notion about the financial health of FL. But Bob's explanation seemed sound and indicated to me cash flow for payment of royalties was leaving FL occasionally cash poor for the payments. Now that we have had full explanation from Bob and Glen Airoldi it fully seems to me to be just a sound business decision that well may inconvenience me or others but is in no way unfair and just rebalances the FL sales systems. When payment plans first came out I am fairly sure they were unto 12 months only...before this last change caping things to a max 20 months, it had expanded to unto 27 months. That is a long time for FL to wait to get it's money, it is no wonder accounting looked at it and said lets make some changes, not to scrap the system but so it is still available to customers and better suited for FL business model. And like it had been said earlier if the worst ever happened without doubt FL would be snapped up the customer base and it's resources contracts would be too tempting a Jewel to allow to disappear. Whether it would be Lifeway, Harpercollins, or some other company I am sure it would go on (in a dream world it would be Accordance that gets FL, because we would finally get full offline support the mobile app, but i would guess Accordance likely too small to pick up FL even from a bankruptcy sale).

-Dan

-Dan

Posts 235
C M | Forum Activity | Replied: Thu, Nov 26 2015 4:43 AM

Dan Francis:
I have no idea if an IPO would ever come nor do I have any significant notion about the financial health of FL. But Bob's explanation seemed sound and indicated to me cash flow for payment of royalties was leaving FL occasionally cash poor for the payments... And like it had been said earlier if the worst ever happened without doubt FL would be snapped up the customer base and it's resources contracts would be too tempting a Jewel to allow to disappear. Whether it would be Lifeway, Harpercollins, or some other company I am sure it would go on (in a dream world it would be Accordance that gets FL, because we would finally get full offline support the mobile app, but i would guess Accordance likely too small to pick up FL even from a bankruptcy sale).

Dan,

In the real world of life and business, one expects the best, yet prepares for the worst. Logos is a good product. The potentials to do more are huge. What's wrong with an IPO if Faithlife wants to go down that road?

Posts 235
C M | Forum Activity | Replied: Thu, Nov 26 2015 5:27 AM

Bruce Dunning:
I hope that the above has answered your questions which have also been addressed a number of times over the years. F

Thanks for your insights. Each year brings new challenges. Besides, It good to hear what we know to be so. Children and wives like to hear "I love you" not that anything has changed--Just a re-affirmation.

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Dan Francis | Forum Activity | Replied: Thu, Nov 26 2015 11:28 AM

Charles McNeil:

Dan,

In the real world of life and business, one expects the best, yet prepares for the worst. Logos is a good product. The potentials to do more are huge. What's wrong with an IPO if Faithlife wants to go down that road?

You misunderstood me or I was very unclear, I have nothing against an IPO, although it may change the course of the company greatly, especially if Bob held back anything less than 51%. I also am not too sure how the fickle markets would respond to Faithlife. An IPO may be a wonderful thing or a horrible thing. I honestly have not thought about it enough to have a solid opinion. 

-Dan

PS: I do think of Apple though, a strong company that after it went public booted out the visionary founder and nearly died till he came back to rescue it. I am not saying any one person is needed for Apple or Faithlife, just that sometimes the short term corporate interests can be at odds to the long term health of a company.

Posts 235
C M | Forum Activity | Replied: Thu, Nov 26 2015 12:48 PM

Dan Francis:
You misunderstood me or I was very unclear, I have nothing against an IPO, although it may change the course of the company greatly, especially if Bob held back anything less than 51%. I also am not too sure how the fickle markets would respond to Faithlife. An IPO may be a wonderful thing or a horrible thing. I honestly have not thought about it enough to have a solid opinion. 

Thanks, Dan.

We're not far apart in our understandings. All I want is what's best, to bless all the rest.

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Matthew C Jones | Forum Activity | Replied: Thu, Nov 26 2015 1:40 PM

Charles McNeil:
What's wrong with an IPO if Faithlife wants to go down that road?

If we read up on the history of Logos we discover an IPO that was less than pleasant. I don't think they will do it again. 

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Bob Pritchett | Forum Activity | Replied: Thu, Nov 26 2015 1:40 PM

The official word:

Faithlife is fine.

We haven't lost money in any year since sometime around 1997. We are still growing, though slower than in the past. (We spent a decade growing at 20% / year, but that's harder to sustain as the numbers grow.)

We are still privately held and controlled by the Pritchett family. (We are actually more closely held than we were 18 years ago... we have bought out earlier shareholders and consolidated ownership.)

The Payment Plans got away from us; I have explained the math in detail elsewhere, and that's what it is: a math problem. Something that was a way for a few customers to stretch out a big purchase became something that too many people used for every purchase; it allowed us to continue growing revenue further/faster than might have happened otherwise, while slowing down cash flow.

We presently engaged in a season of operational tightening-up: we're examining (and sometimes improving) everything from expense report processing to payment plans to uncollected receivables to management training to Logos Now subscription rates to employees reviews to new initiatives to office supply purchases.

This is part of our normal cycle. While there may be better-run companies that are on top of all these things all the time, many growth-driven businesses (or at least this one!) have to occasionally take their foot off the gas pedal and focus on operational improvements. Processes need to be created where there weren't any, waste need to be rooted out, and ideas/projects/procedures that worked at one scale and don't at the new scale need to be re-considered or eliminated.

The immediate impetus is a desire to continue growing. We have actually done such a good job in our core category that we're at risk of slowing growth: of the people who say 'but of course I would rather do my Bible study with electronic tools than paper books!' we have had great success. Those people (you!) are relatively easy to find (they often find us!) and bring on board. The people who cling to their paper, who aren't searching the web for Bible software, etc. are more expensive to find and convert.

Of pastors (who as a class spend more on Bible study tools per individual) we have actually reached a surprisingly large percentage of the market. (We don't have a majority of English-speaking pastors using our product yet, but we are a lot closer than you'd think. And, again, we've brought the 'easy converts' on board already.)

And the software has matured to where it meets and exceeds the needs of many customers. While I know many of you here in the forums subscribe to Logos Now or are anxious to get Logos 7, with each new release more and more people decide that the version they have is enough. (And not because they've stopped using it -- we have stats that show people using Logos 4 or 5 daily, and when we ask they often tell us they're happy and love it, but just don't need 6 because their study method / needs are well met already.)

(I have this same experience with lots of products. I used to be excited about each new release of Word and Excel; now I barely pay attention, because my specific use cases for each were completely addressed by the 2007 (?) feature set.) 

We want to keep growing. There are many reasons, from the personal (it's more fun than shrinking!) to the financial (we still have investors, and it's a responsibility to steward their investment wisely) to the pragmatic (growth creates opportunities for our team members; without growth in the organization individuals who are growing need to stay in the same job/salary, or compete for limited advancement opportunities, or leave to find new opportunities).

One of the best ways to grow is to find 'adjacent markets', and we're pursuing that on multiple fronts. Taking our products to new language markets (German, French, Chinese, Korean, Portuguese, etc.) is an obvious adjacency. Making products in new categories that our existing customers also spend in is another. (Hence Logos Mobile Education, Proclaim Church Presentation software, etc.) Offering our existing products in ways that make them accessible to previously unreachable customers is yet another. (Hence Logos Cloud and subscription based offerings, for people who do like renting vs. buying.)

This type of new market growth can require significant investment. We still need to spend to serve our existing customers and market (you are incredibly important to us!) but we need cash to invest in future markets -- and even with which to make mistakes! :-)

For example, Proclaim lost money for about five years. It is a subscription product, meaning revenue comes in slowly, month by month, and it also required a significant up-front investment in code: it had to work on the first day, before earning the first dollar, and even then it took a long time to build a mature product and feature set. Today it is a strong, mature product that works well and has thousands of happy, paying customers, and it is paying its way. And at this point each addition Proclaim subscription is very profitable -- the incremental costs of supporting one more church are relatively low, and there's no royalty to pay on the core product. Proclaim should be a significant contributor in the coming years.

But it took five years to get here, during which it was subsidized by Logos Bible Software.

We've been investing in building a German base package for over a year. We've hired staff, paid translators, traveled to Germany, licensed books, etc. That's a lot of expense for a product that hasn't shipped yet. Once it does, it should be great and should help us grow -- but it could still take another year or two (or more?) before it's a consistent contributor at a scale that covers the fixed costs of translation, licensing, text conversion, support staffing, etc. The very first German base package customer won't represent much revenue -- but will expect a fully mature product, tech support, etc.

And we're building out multiple languages, as well as other product areas.

When a huge portion of our revenue came from pre-pub product sales, and all base packages were sold in single transactions, cash flow was strong and you, the customers, were essentially acting as our financing partner: all the money came in the day a pre-pub shipped, and all new sales brought in the full price the same day, making it easy to pay royalties 90 days later, etc.

The intersection of increased use of payment plans with the maturity of the core market and the need to make investments in adjacent spaces has exacerbated the cash crunch; this is causing us to look carefully at our operational controls, revenues, costs, cash flow, etc. This is always a good exercise and something we should do anyways.

We are also considering taking on outside investment to help fuel the next round of growth. We don't need to do this, but it could be a great way to ensure we keep growing, creating opportunities for the business and the people who are investing their careers here -- as well as a way for us to be of greater service to you and the church.

We used outside investment to start the company. Six people invested the cash the founders needed to quit our day jobs and work on Logos Bible Software full time. It allowed us to hire a team and build the business. We haven't taken on any outside investment since 1995, but it's possible that it would be wise to do again. It isn't particularly unusual for businesses to do this to fund growth, and it's not a sign of desperation, or failure -- it's just one of many tools in the toolbox for building a business -- and particularly for accelerating growth.

The preparation for considering investment is very healthy. If you take the time to look at your business the way a potential investor would, you see things from a different perspective, are forced to explain and justify your use of resources, etc.

I have no intention of pursuing an IPO, even though the process we're going through internally is similar to what you'd do to get ready for that. IPOs are in less favor than ever, largely due to the higher regulatory burden and attendant costs of being public today. I have a further aversion in that I care deeply about our mission to use technology to help the church grow in the light of the Bible. While it might be possible to find a private investor who cares about that, public companies face different pressures and interests.

The bottom line is that we are here for you and intend to be here for you indefinitely and are working hard to ensure that our operations and financial situation support our being here for you indefinitely. We may bring in investors to help us grow, or our process of introspection and operational improvements may show we can continue growing with our own resources -- always our favorite plan!

Either way, we're fundamentally a strong business, and we have dozens of options to which we could retreat if circumstances got ugly, all of which would have no impact on our ability to continue serving our existing customers. 

I'm sharing a lot of internal information and thinking ... but you're as smart and concerned a group of customers as any company has ever had, and if/when you see things that could possibly tell a story, you'll probably come up with one. I just want to make sure you don't go running off with the wrong story. :-)

I know that some of you think we don't communicate enough (I'm sorry -- I fear I could just write all day long and still not meet that need!), but we are at least very open. If you're wondering, just ask.

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Bruce Dunning | Forum Activity | Replied: Thu, Nov 26 2015 2:46 PM

Bob Pritchett:

The official word:

Faithlife is fine.

Once again you have stepped up to the plate to make everything crystal clear. Thank you Bob for doing this - especially since you posted this on Thanksgiving Day. I hope you enjoy the rest of this holiday to the max. Blessings!

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Steve Maling | Forum Activity | Replied: Thu, Nov 26 2015 6:30 PM

Bob, many thanks for a beautifully written, very informative, and truly reassuring letter.

Now, as a retired pastor, I join Bruce in hoping you get back to the family for some re-creation[Smile.

Shalom, shalom.

Posts 525
Kent | Forum Activity | Replied: Thu, Nov 26 2015 6:36 PM

Charles McNeil:
No one wants to come aboard a sinking ship. This inquiry is a fair question for any reasonable, responsible, Christian steward. Things can happen very fast in the times in which we are living. Not withstanding, it pays (always) for one to do his or her homework before investing heavily in a product.

I don't understand this. In what way are you looking to "come aboard?"  Do you require information like this from other companies when you buy their product?

Nevertheless, Bob has been very forthcoming and did not have to be. We are customers and he does not have to provide any more information than any other private business does. Giving away the software and only charging for resources is an excellent business model that has benefited Faithlife well and has given us tools that other electronic book distributors can't touch. Those that complain of a lack of communication should try and get more from any other company. I have never known a CEO to directly contact customers to explain anything.

Yet I still sense the feeling of entitlement among those that use Logos and it saddens me to see people calling themselves followers of Christ whose attitude is not distinguishable from others.

Posts 523
Fasil | Forum Activity | Replied: Thu, Nov 26 2015 6:43 PM

Thanks for the explanation. Have a blessed Thanksgiving!

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