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

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.

Don Awalt said:

I hope in the operational improvements the forum software is high on the list.

The forum software is on a third-party platform that is essentially unsupported; we hack changes into as we can, but have had several incidents of the person being assigned to it (and who knows it well) leave the company.

It basically works, and improving it is expensive and doesn't directly generate revenue; our long-term hope is to have the forums hosted by Faithlife discussion groups, but we know the technology isn't ready for that yet. In the meantime we don't have the resources or enthusiasm to invest in a new third-party solution (which would require more custom code to integrate with our single-sign on, user accounts, etc.).

We did explore other platforms, and considered Discourse. ChristianDiscourse.com was set up for its own purpose, as well as a form of test-bed to see if people really took to it more than this platform, but I believe our conclusion is that it's not significantly superior, or even as well suited, to be worth switching these forums to.

So the plan for forums is that once Faithlife Groups support really robust forums, we'll move them there.

Don Awalt said:

Somewhere along the line Faithlife got the idea that, in fear of saying something that does not come true, they won't say anything until there is 100% certainty.

We got this idea from our customers here in the forums. :-)

I've been doing this a long time, and we have never announced a single date or plan without being castigated for every eventual variation from that plan. So we don't make predictions about dates.

Don Awalt said:

For me, there are some things really important to me that FL just doesn't reply on. From a customer perspective it feels like I spent a ton of money and they just don't care.

Again, I don't think you're being fair in light of our history.

We generally reply to every direct question we know the answer to. The problem is, we just don't know the answer to lots of things. 

I believe that most of what you're complaining we don't reply to is questions about 'When?' or 'What is the status?'. And the answer is, we don't know. There are more than 400 people in this organization, and more than 800 involved in our partner text production company. The process of releasing a book involves us, our partner production companies, the publisher, etc. It's a big huge machine with many moving parts and lots of gating factors. The staff who hang out on the forums don't know the status of each of the 8,000 - 10,000 titles moving through production. They don't know if the only person who knows how to check this is going on vacation next week. And it's very expensive to try and chase something down, in time and resources, and even then you can be wrong. And it doesn't matter, because there's almost nothing you can do to change the result, and guessing as to delivery date is just likely to antagonize someone when the guess is wrong.

Don Awalt said:they are terrible at setting expectations and being transparent on what their goals and intentions are.

And when the question isn't about delivery dates for books, the answer is also likely "We don't know." We're changing things all the time -- all 400 of us! Teams meet weekly, and things are constantly re-prioritized, based on resources, revenue, and staff.

Don Awalt said:

but I am crippled with some issues in the software and it apparently is super low priority, apparently because it won't help FL grow enough, or there isn't the money to address them because the money I spend on Logos/Verbum is going to some new initiative I don't at the moment care about. Maybe I am not valued as a customer any more, despite how Bob says he values us.

There are literally thousands of cases in our issue tracking system. Some are bugs, some are requests, some are new features. We have to balance 'fixing potholes' that annoy users with putting in new things that drive upgrades and sales. And some things which seem obvious and easy to you are actually hard to do, or expensive, or require a particular set of skills that only a few people on staff have, and they're working on other issues. We have 3.2 million registered users, and you'd be amazed to learn how diverse their interests are. (For example, some users are 100% mobile, and are angry that we spend any time on the desktop -- an antique platform! -- instead of 100% of our energy on mobile. Others say mobile is a simple tool for reading, and they bought powerful Bible software, and 100% of our time should be on fixing / improving the desktop software.)

We do value our customers -- but with millions of them, we have to spread that attention around. (Even if we just count 'big money' customers, there are thousands with significant investments, and diverse priorities. I could name four forum users who alone could keep us busy for years! :-) )

Don Awalt said:

I get more responses from people telling me what forum to post my requests for updates in, than I do responses from FL.

The people who spend the most time in the forums, like Kevin, have that as part of their job. However -- partially because they spend all day in the forums! -- they don't have the answers to your questions. When you're sent to another forum, it's to increase the chance that the person who does know will answer, because teams tend to watch the forums related to their areas of responsibility. I'm sure you could just ask that Kevin or I do this dispatch for you, but we don't even always know who to contact -- the 400 people are on dozens of teams, and team assignments change frequently. (Think about the math -- if each person moved just once a year, it would mean someone was moving every day! And dev teams and marketing team members often move more than once a year.)

But maybe these cases don't cover what you're talking about. Can you give me an example of your top three unaddressed issues / unanswered questions? I promise to directly address them all.

(I know they're probably already in the forums, but I can't read the whole forum traffic -- it would literally take my entire day, and I'm going other things that I hope support you.)