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Well, this BSer found a great investment opportunity in Snakes&Lattes. He gave Ben the chance to go out of bankruptcy and continue to develop his dream, and now we are seeing the results.
Thanks to that BSer we can take part now in a business which WILL be worth millions in the future ;)
I don’t think anyone can rationalize what’s going on with AMFE. As you said, it doesn’t make sense. Short explanation is that it needs more buyers.
Why aren’t people buying? Who knows. Maybe AMFE is lost in the great sea that is the Pinks. Maybe people are looking to buy in once it gets out and is at least QB or QX.
We just need to be sure of what we have. Don’t give into the temptation to sell, because once this jumps, it’s gonna jump big.
Lol
In Pinkyland there are no fundamentals....except when there are, and Snakes&Lattes is laying down an extremely solid base for the future.
First the obvious question: we are in the Pinks, and should compare AMFE to the Pinks, how many Pinks are there out there like AMFE? How many symbols actually represent a credible business to begin with? That’s the crux of the matter here. The reason why people are waiting for the audits is because they want something to trust. Do you not trust your eyes? Wake up and smell the coffee people! You do not fake brick and mortar! That’s evidence that you can see!
A while back Roger said that due to the revenue existing at the time we could only open 1 location at a time, but eventually we would be able to open 2 or 3 at the same time. It’s funny because the last PR mentioned 4 new locations in the works with 1 possible location being discussed in Las Vegas. That’s a total of 5 extra locations, bringing our total to 9. Well guess what? This isn’t even what Roger was talking about! This is only interested parties that wanna jump in on a future success! And talking about interested parties, take a look here:
“As previously stated in press and on twitter, the Company has received a high volume of correspondence from parties interested in opening Snakes and Lattes locations and has only met with and vetted a small portion to date.”
So those 5? They are the beginning. There will be more. From a previous PR:
“We are currently in negotiations with 23 separate locations for potential Snakes & Lattes franchises/joint ventures by interested parties. Negotiations at this point are preliminary as we wait for the audited financial statements to be completed allowing us to discuss definitive franchise agreements.”
It’s very likely that these 5 come from the group of 23 mentioned. Either way, we are seeing progress. A lot of progress. We know that there are at least 23 people or interested in franchising or at least 23 possible locations being looked at.
Yea, the audits will make the process a lot faster, but if you wait until the audits are done you expose yourself to buying in when it’s too late. Can you imagine yourself 3 years from now looking at AMFE again and seeing that each stock costs $2.50? $5? $10?? And then thinking to yourself “I had the chance to buy in at $.09 $0.15, $0.40?
Those of you who moan about the audits need to see the writing on the wall. Snakes IS going to go to NASDAQ. At this point it’s not a question of how. We already know how:
1. Locations/franchises
2. Distribution/ exclusivity deals
3. Publishing
Snakes&Lattes now has its hands on the entire chain of the business. Do you not realize how important this is for the business? They are creating a huge barrier of entry for any other business that wants to compete in the future against them. That’s why it doesn’t matter how many other game cafes open. None of them do what we do, and Snakes is making it so that every game café in the vicinity will have to do business through them. No other business cafe offers investors the chance to participate in this growing trend.
Snakes will head north. Way north. The writing is on the wall for those who have eyes to see and for those who have ears to listen.
Lol what? 5 new locations bunny.
5 new locations bunny
5 new locations bunny
5 new locations bunny
5 new locations bunny
Something that struck out to me was the casual tone of the PR. It was like: “hey guys, just wanted to let you know that we have 5 new locations on the works. Have a nice day!”
Remember how last year the opening of Midtown was so important? And it was, I am not downplaying the importance of Midtown at all, but this PR shows how much we have grown in just one year. So much so that last year management was over ecstatic in that they were going to be able to open a new location, and now they are casually mentioning that there are 5 new locations in the works. Guys, this shows growth.
“As previously stated in press and on twitter, the Company has received a high volume of correspondence from parties interested in opening Snakes and Lattes locations and has only met with and vetted a small portion to date.”
I can’t stress this enough. The company is using a very casual tone because they expect many more locations to open in the near future. This is like, “5 new locations? Check”
The audits are very important for the big guys, and we want the big guys here because they will take us to the dollars. But make no mistake, this IS going to the dollars. Multidollars.
Well, that was a nice little update.
So as a recap, there are 2 firm letters of commitment to open a location in 2 different states : Charlotte, NC, and Houston, TX.
A previous investor approved the opening of 2 separate CORPORATE locations in Denver, and Fort Collins CO.
And the team is meeting with a NEW INVESTOR, who wishes to fund a new location in Las Vegas NV.
A very nice update indeed. Notice how casually they mentioned 5 new locations? Snakes is going to blow up. #WORLDDOMINATIONINDEED
Yea, they foreshadowed it. And now we are seeing things are happening as they were foreshadowed.
Amfil Technologies Inc. Signs LOI To Open A New Snakes & Lattes Venue in Charlotte, North Carolina And Announces That A Location Will Also Be Coming To Denver, Colorado
“Amfil Technologies Inc. (OTC Pink: AMFE) is pleased to announce that Snakes & Lattes has signed a Letter of Intent (LOI) to open a Snakes & Lattes location by way of a Joint Venture partnership in Charlotte, North Carolina. The partnership arose from the company’s recent visit to the area.”
“While this Snakes & Lattes location is projected to open in 2019, further locations planned in other regions may open earlier. The US Expansion Team will continue visiting different US regions/cities to meet with potential partners to identify and secure prospective venues for further openings throughout 2018 and into 2019.”
“The team will then proceed on to Denver and Fort Collins, meeting with interested parties and viewing potential sites for further Snakes & Lattes locations. The Denver location planned for the area will be corporate-owned, and is projected to commence construction in 2018, provided the right location is secured. A private investor has already committed to fully funding this location”
https://www.otcmarkets.com/stock/AMFE/news/Amfil-Technologies-Inc-Signs-LOI-To-Open-A-New-Snakes--Lattes-Venue-in-Charlotte-North-Carolina-And-Announces-That-A-Loc?id=199610
“US Expansion Team visits going well! 2 parties in Texas already submitting LOI's for leases. Also, 2 additional firm commitments waiting on specific buildings. PLUS, a second LOI for North Carolina. That is a total of 6 partnerships in the works for future S&L Locations thus far!”
US Expansion Team visits going well! 2 parties in Texas already submitting LOI's for leases. Also, 2 additional firm commitments waiting on specific buildings. PLUS, a second LOI for North Carolina. That is a total of 6 partnerships in the works for future S&L Locations thus far!
— Snakes & Lattes Inc. (@SnakesLattesInc) August 14, 2018
As per the last PR, we should see S&L locations in the double digits by 2019.
Lol it’s kinda funny when you think about it. Last year that sorta news would have made everyone go in a frenzy, fast forward to this year and everyone was kinda “meh”.
I agree with you. I think REC touched on this topic a few months ago. This is one of those stocks where you KNOW it is going to explode ...you just don’t know WHEN.
The best way to handle this stock is to load up, and set it on the back burner. Continue doing your business as usual and just keep loading up. Because we all know Snakes is going to be a billion dollar company. We just don’t know when.
No, I remember as well. The company touted a game which would be graphically designed by someone who also worked in Hollywood or something like that. I believe they also mentioned that that game would be announced in the first part of 2018.
Something must have happened during development for them to go quiet on that specific game. That said, instead of 1 game, we got an entire company dedicated to making games so I am not really that upset about it at all.
Perhaps the game designers from S&L will unite with Morning?
Right, I see what you mean. We haven’t had any news on those games, but since Morning now belongs to us, any games they make counts as ours right? Lol
“The pilot project with Wal-Mart is set to commence shortly as the newly published games are delivered towards the end of summer.”
https://www.otcmarkets.com/stock/AMFE/news/Amfil-Technologies-Inc-Announces-A-Firm-PO-Received-From-Walmart-For-Multiple-Of-The-New-In-House-Published-Game-Titles-?id=197397
I think Snakes can totally become a billion dollar company. They are making all the right moves, and more importantly, they are producing results.
I don’t think they are going to NASDAQ with less than 50 locations. In order for Snakes to become a billion dollar company we still need to see major increases in revenue, or at the very least , brand awareness.
Snakes is doing just fine right now. They are doing all the correct moves to increase, not only their revenue, but also the gross margin of those revenues, which I think is just as important as the revenue itself. That Morning acquisition will prove to be one of the best decisions made by management going forward.
Lol That’s exactly right
I agree with you. The audits are one thing, and I give Roger the benefit of the doubt on that one, but GRO3 is quite another. If you do not know if you are going to be able to provide an update, then don’t tease one. It’s horrible form.
That said, I personally am invested in AMFE because of S&L, so I don’t mind as much, but yeah. We should let Roger know that he should be more mindful regarding his communication with tweets and promises, particularly with GRO3
At the pace we are going, certainly not! Just think about it:
No toxic debt
No need for dilution (Roger actually decreased the OS!)
And perhaps most importantly
A huge expansion is underway!
To quote the grand master Yoda:
“To bankruptcy the signs point not!”
Bankrupt? A company that is VISIBLY (and I stress VISIBLY) growing is not a prime candidate for bankruptcy.
I think this is an easy fix tho. Why not ask Roger? If enough of us ask, he is bound to answer eventually.
And yes I would totally bother Roger with this. This is a business decision which could have a huge potential on the stock.
Or maybe he has considered it and there are some cons which he is taking into consideration? If anyone knows anything that could be a con, I would very much appreciate the instruction.
Lol *Edit*
Has anyone bothered asking Roger about the CSE?
Has anyone ever bothered to ask Roger about dual listing in the TFSA?
Excellent post. It should be read by everyone, and I completely agree.
The biggest difference between AMFE and the rest of the Pink stocks is its results.
That in itself should be a huge BUY signal for all. This is a company that is producing results, not talking about expectations.
If you can’t believe the numbers, because they are not yet audited, then don’t. But brick and mortar does not lie.
We are certainly on the right track:
S&L has a LOT of interest to start franchising. There are 23 people who want in. That is pretty amazing considering that nobody knows what a S&L is. I expect that once Tempe opens, and once people start to acknowledge what it is, many more people are going to want a Franchise.
Distribution: this is the part which has been growing the fastest right now, and as the brand continues to grow, so will the distribution deals. Also, the team behind S&L is aggressively pushing for exclusive distribution deals.
Publishing: this is what made Microsoft such an attractive investment. They could sell the same software over and over without increasing costs. We are in a similar position. We will make a few games, and then move on to the next, but these games will continue to sell, and we can push these games in each location. They key factor will be: what if any of these games becomes a hit?
GRO3/ NSI will continue being the “cherry on top” until they start making meaningful contributions to the bottom line.
Until then, if you are invested in AMFE, it’s because you are invested in Snakes&Lattes.
Do I want that to change? Yes. I want to know what is going on with GRO3.
But I also know S&L is taking us to NASDAQ EITHER WAY.
(REPOST)
How to value a company.
https://scalefinance.com/all-revenue-is-not-created-equal/
Not all companies are valued at 10x their earnings. In fact relatively few of them are. That article made a list of the characteristics shared by the companies that are valued at 10x or more of their earnings. I will try to see how they compare to AMFE.
(Everything quoted will come from that webpage)
1.Sustainable Competitive Advantage (Warren Buffet’s Moat)
“By far, the most critical characteristic that separates high multiple companies from low multiple companies is competitive advantage. This concept, well explained in Porter’s book by the same name, basically asks the question, “How easy is it for someone else to provide the same product or service that you provide?” If your company has “high barriers to entry,” Wall Street will be super excited, as investors will have confidence discounting cash flows many, many years into the future.”
Yes there are other board game cafes. Many of them. Hundreds possibly. But how many of them do the same thing that S&L does? How many of them function not only as a cafe, but also as a retailer, as a distribution center, and now as a publisher? How many of them make consistent relations with game makers and big retailers such as Walmart? Only 1. That’s right Snakes&Lattes.
2. The Presence of Network Effects
“No discussion of competitive advantages and barriers to entry is complete without a nod to perhaps the strongest economic moat of all, network effects. In a system where the value to the incremental customer is a direct function of the customers already in the system, you have a powerful dynamic that tips towards winner take all.”
“Unfortunately, strong form network effect companies are far and few between. Fortunately, when they do exist, they are typically leading candidates for the 10X+ price/revenue multiple club. Microsoft, Ebay, Skype, Google Adwords, and Facebook (in their prime) all benefited from network effects.”
We touched upon this in the previous point. S&L is different from the rest of the gang because of the relations it consistently creates. With the designer nights, game developers know who they can turn to to have more exposure for their games. When one sees the reviews they have on Amazon, everyone praises the excellent way S&L handles distribution. Even other game board cafes refer to S&L as “The Mothership”. The best thing about it all is how we are seeing everything develop right before our eyes.
3. Visibility/Predictability Are Highly Valued
“For the same reason that investors favor companies with sustainable competitive advantages, investors favor pricing models that provide a high level of predictability and consistency in the future....The more certain you can be of future cash flows, the higher premium you will put on a business, and as a result, you will see a higher price/revenue multiple. “
It must first be admitted that it has been fairly difficult to predict revenues for S&L, but this is only because they have been investing so heavily in growth, and we have seen the growth. Nonetheless there are a few things which point to the predictability: customers who come directly to the store must pay a fee just to get in; orders will be placed for popular games when they are sold out, and S&L has obtained many exclusive distribution rights to many of these games.
In all honesty, this one must be carefully observed because although there are very promising signs, we still can not be completely certain in the “predictable factor” of S&L, or even if we can, we still have difficulty gauging it.
4. Customer Lock-in / High Switching Costs
“If investors value predictability, than retaining customers for long periods of time is obviously a positive. Conversely, if customers are churning away from your company, this is a huge negative.”
“For non-subscription businesses, customer-switching costs also play an important role. If it is relatively easy for your customer to switch back and forth from your products to you competitors, you will likely have a lower price/revenue multiple as your pricing power will be quite limited. On the other hand, if it is quite difficult for a customer to switch away from your product/service, you are likely to have stronger pricing power, and longer customer life, which will inevitably result in better DCF dynamics.”
The question we must ask ourselves is: “what are S&L products and services?” Yes game board cafes exist, but do they have the same library? S&L has amassed a HUGE library of games that they offer their customers for a relatively low point of entry.
As mentioned before, Snakes has acquired exclusive distribution rights to many of these games, and this means that no matter where the customer buys the game, they have to depend on S&L to distribute it, and now that S&L has officially acquired a game making company, the games made and distributed by this company will have to pass, by necessity, through our hands. I.E. Customer lock in.
5. Gross Margin Levels
“This may seem super-basic or even tautological but there is a huge difference between companies with high gross margins and those with lower gross margins.”
Again, we have seen S&L work towards bettering their gross margin levels. They are doing so by obtaining exclusive distribution rights, and much more importantly, by creating their new division: Publishing.
The focus of management is directed at creating better gross profit margins. This is old news, but we should start connecting the dots by now.
6. Marginal Profitability Calculation
“Investors love companies with scale. What this means is that investors love companies where, all things being equal, higher revenues create higher profit margins. Microsoft had wonderful scale in this manner for many, many years. Selling more copies of the same piece of software (with zero incremental costs) is a business that scales nicely. Companies that are increasing their profit percentage while they grow are capable of carrying very high valuation multiples, as future periods will have much higher earnings and free cash flow due to the cumulative effect of growth and increased profitability.”
We should start noticing by now how important the Publishing division will be for S&L. Once games are made, selling the games over time will generate more profit percentage, which in turn will create a better bottom line for the company.
7. Customer Concentration
“In their S-1, companies are required to highlight all customers that represent over 10% of their overall revenue? Why do investors care about this? Once again, all things being equal, you would rather have a highly fragmented customer base versus a highly concentrated one. Customers that represent a large percentage of your revenue have “market power” that is likely to result in pricing, feature, or service demands over time. And because of your dependence on said customer, you are likely to be responsive to those requests, which in the long run will negatively impact discounted cash flows. You also have an obvious issue if your top 2-5 customers can organize against you. “
This is pure conjecture in my part, so feel free to correct me if I am mistaken.
Again, let’s ask ourselves an important question here: “who are the customers of S&L?” Let’s see if we can identify them:
1. The individual customers who enter their locations, and buy in store or online.
2. The big box retailers who buy games through S&L due to their exclusive distribution rights or simple good service.
3. Other places which buy games through S&L but are not necessarily big box retailers. Examples: other game board cafes, or any location interested in buying board games.
While it is easy to see that S&L caters to many customers, it is not so easy to see how concentrated they are as of yet. Still, we must consider that we are still observing how the foundations are being laid, and even now we can see that management has tried to cater to as many customers as possible.
8. Major Partner Dependencies
“Investors will discount the price/revenue valuation of any company that is heavily dependent on another partner is some way or form. A high profile example of this is Demand Media’s reliance on the best seo stuff. Google isn’t the customer per se, but they can heavily impact the outcomes for Demand. And even if they don’t impact them (the recent quarter was in line with expectations), the mere awareness that they could, can have drastic impact on long-term valuation, and therefore price/revenue multiple.”
“These strong dependencies eat away at investors simply because the company is exposed to issues that are out of the control of management. As an example, Kayak’s potential IPO buyers will need to get comfortable with Google’s acquisition of ITA, Kayak’s use of ITA, and whether or not Google goes from being a source of traffic to a competitor. Likewise, if and when Zynga files for an IPO, new investors will be inherently betting on whether or not Zynga’s Facebook dependency is a positive or a negative. No one wants a partner policy or algorithm change to have unpredicted negative impacts on a public company. These risks are accounted for with lower valuation multiples.”
As for S&L, the distribution branch is one of its biggest money earners. While S&L does not have any partnership which can negatively impact their earnings, a large part of the earnings are produced by the distribution side. This means that some quarters will be much more profitable than others. Something to be aware of is how management will try to balance this in order to maximize profits.
9. Organic Demand vs. Heavy Marketing Spend
“All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple. Think about this simplistic example. There are two stores in the middle of town. One has a product/service that customers love, and as a result, customers flock to the store day in and day out all on their own. These customers then tell other potential customers, and through this “word of mouth” process, the customer base grows even larger. The second storeowner advertises frequently, and all new customers are a result of this advertisement and promotion (which obviously costs $$). Which business would you prefer to own?”
It is easy to see how the S&L business model so closely resembles the organic design. They do not need to spend heavily on marketing because their customers will do it for them. Once customers go through the door and live the experience on their own, they will tell others to do the same. Furthermore, this is a proven business model for S&L.
10. Growth
“Nothing contributes to a higher valuation multiple like good ole’ growth. Obviously, the faster you are growing, the larger, and larger future revenues and cash flows will be, which has direct implications for a DCF. High growth also implies that a company has tapped into a powerful new market opportunity, where customer demand is seemingly insatiable. As a result, there is typically a very strong correlation between growth and valuation multiples, including the price/revenue multiple.”
Is Snakes&Lattes growing? Consider that the company was bought 2 years ago, on the brink of bankruptcy. It now has 3 locations, with the 4th set to open in mere weeks, a new distribution division, a new publishing division, and set to have locations in the double digits by this time next year.
Is Snakes&Lattes growing? I believe so, and at an incredible pace if I may add.
It is extremely hard to see know at which multiple a company should trade in. But at least we can see that S&L (and by necessity AMFE) share many of the characteristics desired in a company which does trade at a 10x multiple.
Talking about millions is hard. That’s a lot of zeroes. Let’s use a simpler example shall we?
I run a business. It’s a booming business! I make $10 every day!
But I also have to pay my employee $1 every day
And my water bills! That’s another $1 a day
And my electric bills! That’s $3 (electricity isn’t cheap)
So, out of my original $10, I now have only $5 left :(
But If I had another $5 I could open a second business down the street! (Yay)
Where will I be able to find that money?
Oh look! Timmy the bank owner says that he will lend me $10 which I can pay back slowly in a few days!
Isn’t that neat! Now I have $15! I can open a new shop (which costs $10) and I still have $5 to cover the expenses while I start making money off the 2 businesses ! (Yay)
(REPOST)
How to value a company.
https://scalefinance.com/all-revenue-is-not-created-equal/
Not all companies are valued at 10x their earnings. In fact relatively few of them are. That article made a list of the characteristics shared by the companies that are valued at 10x or more of their earnings. I will try to see how they compare to AMFE.
(Everything quoted will come from that webpage)
1.Sustainable Competitive Advantage (Warren Buffet’s Moat)
“By far, the most critical characteristic that separates high multiple companies from low multiple companies is competitive advantage. This concept, well explained in Porter’s book by the same name, basically asks the question, “How easy is it for someone else to provide the same product or service that you provide?” If your company has “high barriers to entry,” Wall Street will be super excited, as investors will have confidence discounting cash flows many, many years into the future.”
Yes there are other board game cafes. Many of them. Hundreds possibly. But how many of them do the same thing that S&L does? How many of them function not only as a cafe, but also as a retailer, as a distribution center, and now as a publisher? How many of them make consistent relations with game makers and big retailers such as Walmart? Only 1. That’s right Snakes&Lattes.
2. The Presence of Network Effects
“No discussion of competitive advantages and barriers to entry is complete without a nod to perhaps the strongest economic moat of all, network effects. In a system where the value to the incremental customer is a direct function of the customers already in the system, you have a powerful dynamic that tips towards winner take all.”
“Unfortunately, strong form network effect companies are far and few between. Fortunately, when they do exist, they are typically leading candidates for the 10X+ price/revenue multiple club. Microsoft, Ebay, Skype, Google Adwords, and Facebook (in their prime) all benefited from network effects.”
We touched upon this in the previous point. S&L is different from the rest of the gang because of the relations it consistently creates. With the designer nights, game developers know who they can turn to to have more exposure for their games. When one sees the reviews they have on Amazon, everyone praises the excellent way S&L handles distribution. Even other game board cafes refer to S&L as “The Mothership”. The best thing about it all is how we are seeing everything develop right before our eyes.
3. Visibility/Predictability Are Highly Valued
“For the same reason that investors favor companies with sustainable competitive advantages, investors favor pricing models that provide a high level of predictability and consistency in the future....The more certain you can be of future cash flows, the higher premium you will put on a business, and as a result, you will see a higher price/revenue multiple. “
It must first be admitted that it has been fairly difficult to predict revenues for S&L, but this is only because they have been investing so heavily in growth, and we have seen the growth. Nonetheless there are a few things which point to the predictability: customers who come directly to the store must pay a fee just to get in; orders will be placed for popular games when they are sold out, and S&L has obtained many exclusive distribution rights to many of these games.
In all honesty, this one must be carefully observed because although there are very promising signs, we still can not be completely certain in the “predictable factor” of S&L, or even if we can, we still have difficulty gauging it.
4. Customer Lock-in / High Switching Costs
“If investors value predictability, than retaining customers for long periods of time is obviously a positive. Conversely, if customers are churning away from your company, this is a huge negative.”
“For non-subscription businesses, customer-switching costs also play an important role. If it is relatively easy for your customer to switch back and forth from your products to you competitors, you will likely have a lower price/revenue multiple as your pricing power will be quite limited. On the other hand, if it is quite difficult for a customer to switch away from your product/service, you are likely to have stronger pricing power, and longer customer life, which will inevitably result in better DCF dynamics.”
The question we must ask ourselves is: “what are S&L products and services?” Yes game board cafes exist, but do they have the same library? S&L has amassed a HUGE library of games that they offer their customers for a relatively low point of entry.
As mentioned before, Snakes has acquired exclusive distribution rights to many of these games, and this means that no matter where the customer buys the game, they have to depend on S&L to distribute it, and now that S&L has officially acquired a game making company, the games made and distributed by this company will have to pass, by necessity, through our hands. I.E. Customer lock in.
5. Gross Margin Levels
“This may seem super-basic or even tautological but there is a huge difference between companies with high gross margins and those with lower gross margins.”
Again, we have seen S&L work towards bettering their gross margin levels. They are doing so by obtaining exclusive distribution rights, and much more importantly, by creating their new division: Publishing.
The focus of management is directed at creating better gross profit margins. This is old news, but we should start connecting the dots by now.
6. Marginal Profitability Calculation
“Investors love companies with scale. What this means is that investors love companies where, all things being equal, higher revenues create higher profit margins. Microsoft had wonderful scale in this manner for many, many years. Selling more copies of the same piece of software (with zero incremental costs) is a business that scales nicely. Companies that are increasing their profit percentage while they grow are capable of carrying very high valuation multiples, as future periods will have much higher earnings and free cash flow due to the cumulative effect of growth and increased profitability.”
We should start noticing by now how important the Publishing division will be for S&L. Once games are made, selling the games over time will generate more profit percentage, which in turn will create a better bottom line for the company.
7. Customer Concentration
“In their S-1, companies are required to highlight all customers that represent over 10% of their overall revenue? Why do investors care about this? Once again, all things being equal, you would rather have a highly fragmented customer base versus a highly concentrated one. Customers that represent a large percentage of your revenue have “market power” that is likely to result in pricing, feature, or service demands over time. And because of your dependence on said customer, you are likely to be responsive to those requests, which in the long run will negatively impact discounted cash flows. You also have an obvious issue if your top 2-5 customers can organize against you. “
This is pure conjecture in my part, so feel free to correct me if I am mistaken.
Again, let’s ask ourselves an important question here: “who are the customers of S&L?” Let’s see if we can identify them:
1. The individual customers who enter their locations, and buy in store or online.
2. The big box retailers who buy games through S&L due to their exclusive distribution rights or simple good service.
3. Other places which buy games through S&L but are not necessarily big box retailers. Examples: other game board cafes, or any location interested in buying board games.
While it is easy to see that S&L caters to many customers, it is not so easy to see how concentrated they are as of yet. Still, we must consider that we are still observing how the foundations are being laid, and even now we can see that management has tried to cater to as many customers as possible.
8. Major Partner Dependencies
“Investors will discount the price/revenue valuation of any company that is heavily dependent on another partner is some way or form. A high profile example of this is Demand Media’s reliance on the best seo stuff. Google isn’t the customer per se, but they can heavily impact the outcomes for Demand. And even if they don’t impact them (the recent quarter was in line with expectations), the mere awareness that they could, can have drastic impact on long-term valuation, and therefore price/revenue multiple.”
“These strong dependencies eat away at investors simply because the company is exposed to issues that are out of the control of management. As an example, Kayak’s potential IPO buyers will need to get comfortable with Google’s acquisition of ITA, Kayak’s use of ITA, and whether or not Google goes from being a source of traffic to a competitor. Likewise, if and when Zynga files for an IPO, new investors will be inherently betting on whether or not Zynga’s Facebook dependency is a positive or a negative. No one wants a partner policy or algorithm change to have unpredicted negative impacts on a public company. These risks are accounted for with lower valuation multiples.”
As for S&L, the distribution branch is one of its biggest money earners. While S&L does not have any partnership which can negatively impact their earnings, a large part of the earnings are produced by the distribution side. This means that some quarters will be much more profitable than others. Something to be aware of is how management will try to balance this in order to maximize profits.
9. Organic Demand vs. Heavy Marketing Spend
“All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple. Think about this simplistic example. There are two stores in the middle of town. One has a product/service that customers love, and as a result, customers flock to the store day in and day out all on their own. These customers then tell other potential customers, and through this “word of mouth” process, the customer base grows even larger. The second storeowner advertises frequently, and all new customers are a result of this advertisement and promotion (which obviously costs $$). Which business would you prefer to own?”
It is easy to see how the S&L business model so closely resembles the organic design. They do not need to spend heavily on marketing because their customers will do it for them. Once customers go through the door and live the experience on their own, they will tell others to do the same. Furthermore, this is a proven business model for S&L.
10. Growth
“Nothing contributes to a higher valuation multiple like good ole’ growth. Obviously, the faster you are growing, the larger, and larger future revenues and cash flows will be, which has direct implications for a DCF. High growth also implies that a company has tapped into a powerful new market opportunity, where customer demand is seemingly insatiable. As a result, there is typically a very strong correlation between growth and valuation multiples, including the price/revenue multiple.”
Is Snakes&Lattes growing? Consider that the company was bought 2 years ago, on the brink of bankruptcy. It now has 3 locations, with the 4th set to open in mere weeks, a new distribution division, a new publishing division, and set to have locations in the double digits by this time next year.
Is Snakes&Lattes growing? I believe so, and at an incredible pace if I may add.
It is extremely hard to see know at which multiple a company should trade in. But at least we can see that S&L (and by necessity AMFE) share many of the characteristics desired in a company which does trade at a 10x multiple.
Lol wut?
Midtown opened late....and what happened? Nothing. It’s still making money, it’s still consistently full, it is still expanding the brand. What possible bind could JRF be in?
Also, not to be harsh (I admire JRF as much as the next guy) but what possible risk does Tempe opening late entail for AMFE?
The whole point of this location being FULLY FUNDED by a 3rd party was to transfer the risk from the company, to the individual. Now, for JRF’s well being, I hope that Tempe opens as soon as possible, so that he can start getting his return on his investment, but as far as the company goes, nothing will happen if it opens tomorrow or a year from now, because the company did not invest any of its money into the property. The property was FULLY FUNDED by a private investor.
Honestly, In my experience, no matter the project, no matter how big or small, the projected date and the real date always seem to be off
Creating a narrative that he is doing a bad job is also wrong. The latest confirmation was the purchase of Morning (all cash deal) and the recently announced PO from
Walmart.
Not only that, but it is also evident that he is laying down the seeds for the company to have bigger gross margins in the future. This will lead to a higher multiple down the road once we start seeing the proof in the earnings.
(Repost)
How to value a company.
https://scalefinance.com/all-revenue-is-not-created-equal/
Not all companies are valued at 10x their earnings. In fact relatively few of them are. That article made a list of the characteristics shared by the companies that are valued at 10x or more of their earnings. I will try to see how they compare to AMFE.
(Everything quoted will come from that webpage)
1.Sustainable Competitive Advantage (Warren Buffet’s Moat)
“By far, the most critical characteristic that separates high multiple companies from low multiple companies is competitive advantage. This concept, well explained in Porter’s book by the same name, basically asks the question, “How easy is it for someone else to provide the same product or service that you provide?” If your company has “high barriers to entry,” Wall Street will be super excited, as investors will have confidence discounting cash flows many, many years into the future.”
Yes there are other board game cafes. Many of them. Hundreds possibly. But how many of them do the same thing that S&L does? How many of them function not only as a cafe, but also as a retailer, as a distribution center, and now as a publisher? How many of them make consistent relations with game makers and big retailers such as Walmart? Only 1. That’s right Snakes&Lattes.
2. The Presence of Network Effects
“No discussion of competitive advantages and barriers to entry is complete without a nod to perhaps the strongest economic moat of all, network effects. In a system where the value to the incremental customer is a direct function of the customers already in the system, you have a powerful dynamic that tips towards winner take all.”
“Unfortunately, strong form network effect companies are far and few between. Fortunately, when they do exist, they are typically leading candidates for the 10X+ price/revenue multiple club. Microsoft, Ebay, Skype, Google Adwords, and Facebook (in their prime) all benefited from network effects.”
We touched upon this in the previous point. S&L is different from the rest of the gang because of the relations it consistently creates. With the designer nights, game developers know who they can turn to to have more exposure for their games. When one sees the reviews they have on Amazon, everyone praises the excellent way S&L handles distribution. Even other game board cafes refer to S&L as “The Mothership”. The best thing about it all is how we are seeing everything develop right before our eyes.
3. Visibility/Predictability Are Highly Valued
“For the same reason that investors favor companies with sustainable competitive advantages, investors favor pricing models that provide a high level of predictability and consistency in the future....The more certain you can be of future cash flows, the higher premium you will put on a business, and as a result, you will see a higher price/revenue multiple. “
It must first be admitted that it has been fairly difficult to predict revenues for S&L, but this is only because they have been investing so heavily in growth, and we have seen the growth. Nonetheless there are a few things which point to the predictability: customers who come directly to the store must pay a fee just to get in; orders will be placed for popular games when they are sold out, and S&L has obtained many exclusive distribution rights to many of these games.
In all honesty, this one must be carefully observed because although there are very promising signs, we still can not be completely certain in the “predictable factor” of S&L, or even if we can, we still have difficulty gauging it.
4. Customer Lock-in / High Switching Costs
“If investors value predictability, than retaining customers for long periods of time is obviously a positive. Conversely, if customers are churning away from your company, this is a huge negative.”
“For non-subscription businesses, customer-switching costs also play an important role. If it is relatively easy for your customer to switch back and forth from your products to you competitors, you will likely have a lower price/revenue multiple as your pricing power will be quite limited. On the other hand, if it is quite difficult for a customer to switch away from your product/service, you are likely to have stronger pricing power, and longer customer life, which will inevitably result in better DCF dynamics.”
The question we must ask ourselves is: “what are S&L products and services?” Yes game board cafes exist, but do they have the same library? S&L has amassed a HUGE library of games that they offer their customers for a relatively low point of entry.
As mentioned before, Snakes has acquired exclusive distribution rights to many of these games, and this means that no matter where the customer buys the game, they have to depend on S&L to distribute it, and now that S&L has officially acquired a game making company, the games made and distributed by this company will have to pass, by necessity, through our hands. I.E. Customer lock in.
5. Gross Margin Levels
“This may seem super-basic or even tautological but there is a huge difference between companies with high gross margins and those with lower gross margins.”
Again, we have seen S&L work towards bettering their gross margin levels. They are doing so by obtaining exclusive distribution rights, and much more importantly, by creating their new division: Publishing.
The focus of management is directed at creating better gross profit margins. This is old news, but we should start connecting the dots by now.
6. Marginal Profitability Calculation
“Investors love companies with scale. What this means is that investors love companies where, all things being equal, higher revenues create higher profit margins. Microsoft had wonderful scale in this manner for many, many years. Selling more copies of the same piece of software (with zero incremental costs) is a business that scales nicely. Companies that are increasing their profit percentage while they grow are capable of carrying very high valuation multiples, as future periods will have much higher earnings and free cash flow due to the cumulative effect of growth and increased profitability.”
We should start noticing by now how important the Publishing division will be for S&L. Once games are made, selling the games over time will generate more profit percentage, which in turn will create a better bottom line for the company.
7. Customer Concentration
“In their S-1, companies are required to highlight all customers that represent over 10% of their overall revenue? Why do investors care about this? Once again, all things being equal, you would rather have a highly fragmented customer base versus a highly concentrated one. Customers that represent a large percentage of your revenue have “market power” that is likely to result in pricing, feature, or service demands over time. And because of your dependence on said customer, you are likely to be responsive to those requests, which in the long run will negatively impact discounted cash flows. You also have an obvious issue if your top 2-5 customers can organize against you. “
This is pure conjecture in my part, so feel free to correct me if I am mistaken.
Again, let’s ask ourselves an important question here: “who are the customers of S&L?” Let’s see if we can identify them:
1. The individual customers who enter their locations, and buy in store or online.
2. The big box retailers who buy games through S&L due to their exclusive distribution rights or simple good service.
3. Other places which buy games through S&L but are not necessarily big box retailers. Examples: other game board cafes, or any location interested in buying board games.
While it is easy to see that S&L caters to many customers, it is not so easy to see how concentrated they are as of yet. Still, we must consider that we are still observing how the foundations are being laid, and even now we can see that management has tried to cater to as many customers as possible.
8. Major Partner Dependencies
“Investors will discount the price/revenue valuation of any company that is heavily dependent on another partner is some way or form. A high profile example of this is Demand Media’s reliance on the best seo stuff. Google isn’t the customer per se, but they can heavily impact the outcomes for Demand. And even if they don’t impact them (the recent quarter was in line with expectations), the mere awareness that they could, can have drastic impact on long-term valuation, and therefore price/revenue multiple.”
“These strong dependencies eat away at investors simply because the company is exposed to issues that are out of the control of management. As an example, Kayak’s potential IPO buyers will need to get comfortable with Google’s acquisition of ITA, Kayak’s use of ITA, and whether or not Google goes from being a source of traffic to a competitor. Likewise, if and when Zynga files for an IPO, new investors will be inherently betting on whether or not Zynga’s Facebook dependency is a positive or a negative. No one wants a partner policy or algorithm change to have unpredicted negative impacts on a public company. These risks are accounted for with lower valuation multiples.”
As for S&L, the distribution branch is one of its biggest money earners. While S&L does not have any partnership which can negatively impact their earnings, a large part of the earnings are produced by the distribution side. This means that some quarters will be much more profitable than others. Something to be aware of is how management will try to balance this in order to maximize profits.
9. Organic Demand vs. Heavy Marketing Spend
“All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple. Think about this simplistic example. There are two stores in the middle of town. One has a product/service that customers love, and as a result, customers flock to the store day in and day out all on their own. These customers then tell other potential customers, and through this “word of mouth” process, the customer base grows even larger. The second storeowner advertises frequently, and all new customers are a result of this advertisement and promotion (which obviously costs $$). Which business would you prefer to own?”
It is easy to see how the S&L business model so closely resembles the organic design. They do not need to spend heavily on marketing because their customers will do it for them. Once customers go through the door and live the experience on their own, they will tell others to do the same. Furthermore, this is a proven business model for S&L.
10. Growth
“Nothing contributes to a higher valuation multiple like good ole’ growth. Obviously, the faster you are growing, the larger, and larger future revenues and cash flows will be, which has direct implications for a DCF. High growth also implies that a company has tapped into a powerful new market opportunity, where customer demand is seemingly insatiable. As a result, there is typically a very strong correlation between growth and valuation multiples, including the price/revenue multiple.”
Is Snakes&Lattes growing? Consider that the company was bought 2 years ago, on the brink of bankruptcy. It now has 3 locations, with the 4th set to open in mere weeks, a new distribution division, a new publishing division, and set to have locations in the double digits by this time next year.
Is Snakes&Lattes growing? I believe so, and at an incredible pace if I may add.
It is extremely hard to see know at which multiple a company should trade in. But at least we can see that S&L (and by necessity AMFE) share many of the characteristics desired in a company which does trade at a 10x multiple.
How to value a company.
https://scalefinance.com/all-revenue-is-not-created-equal/
Not all companies are valued at 10x their earnings. In fact relatively few of them are. That article made a list of the characteristics shared by the companies that are valued at 10x or more of their earnings. I will try to see how they compare to AMFE.
(Everything quoted will come from that webpage)
1.Sustainable Competitive Advantage (Warren Buffet’s Moat)
“By far, the most critical characteristic that separates high multiple companies from low multiple companies is competitive advantage. This concept, well explained in Porter’s book by the same name, basically asks the question, “How easy is it for someone else to provide the same product or service that you provide?” If your company has “high barriers to entry,” Wall Street will be super excited, as investors will have confidence discounting cash flows many, many years into the future.”
Yes there are other board game cafes. Many of them. Hundreds possibly. But how many of them do the same thing that S&L does? How many of them function not only as a cafe, but also as a retailer, as a distribution center, and now as a publisher? How many of them make consistent relations with game makers and big retailers such as Walmart? Only 1. That’s right Snakes&Lattes.
2. The Presence of Network Effects
“No discussion of competitive advantages and barriers to entry is complete without a nod to perhaps the strongest economic moat of all, network effects. In a system where the value to the incremental customer is a direct function of the customers already in the system, you have a powerful dynamic that tips towards winner take all.”
“Unfortunately, strong form network effect companies are far and few between. Fortunately, when they do exist, they are typically leading candidates for the 10X+ price/revenue multiple club. Microsoft, Ebay, Skype, Google Adwords, and Facebook (in their prime) all benefited from network effects.”
We touched upon this in the previous point. S&L is different from the rest of the gang because of the relations it consistently creates. With the designer nights, game developers know who they can turn to to have more exposure for their games. When one sees the reviews they have on Amazon, everyone praises the excellent way S&L handles distribution. Even other game board cafes refer to S&L as “The Mothership”. The best thing about it all is how we are seeing everything develop right before our eyes.
3. Visibility/Predictability Are Highly Valued
“For the same reason that investors favor companies with sustainable competitive advantages, investors favor pricing models that provide a high level of predictability and consistency in the future....The more certain you can be of future cash flows, the higher premium you will put on a business, and as a result, you will see a higher price/revenue multiple. “
It must first be admitted that it has been fairly difficult to predict revenues for S&L, but this is only because they have been investing so heavily in growth, and we have seen the growth. Nonetheless there are a few things which point to the predictability: customers who come directly to the store must pay a fee just to get in; orders will be placed for popular games when they are sold out, and S&L has obtained many exclusive distribution rights to many of these games.
In all honesty, this one must be carefully observed because although there are very promising signs, we still can not be completely certain in the “predictable factor” of S&L, or even if we can, we still have difficulty gauging it.
4. Customer Lock-in / High Switching Costs
“If investors value predictability, than retaining customers for long periods of time is obviously a positive. Conversely, if customers are churning away from your company, this is a huge negative.”
“For non-subscription businesses, customer-switching costs also play an important role. If it is relatively easy for your customer to switch back and forth from your products to you competitors, you will likely have a lower price/revenue multiple as your pricing power will be quite limited. On the other hand, if it is quite difficult for a customer to switch away from your product/service, you are likely to have stronger pricing power, and longer customer life, which will inevitably result in better DCF dynamics.”
The question we must ask ourselves is: “what are S&L products and services?” Yes game board cafes exist, but do they have the same library? S&L has amassed a HUGE library of games that they offer their customers for a relatively low point of entry.
As mentioned before, Snakes has acquired exclusive distribution rights to many of these games, and this means that no matter where the customer buys the game, they have to depend on S&L to distribute it, and now that S&L has officially acquired a game making company, the games made and distributed by this company will have to pass, by necessity, through our hands. I.E. Customer lock in.
5. Gross Margin Levels
“This may seem super-basic or even tautological but there is a huge difference between companies with high gross margins and those with lower gross margins.”
Again, we have seen S&L work towards bettering their gross margin levels. They are doing so by obtaining exclusive distribution rights, and much more importantly, by creating their new division: Publishing.
The focus of management is directed at creating better gross profit margins. This is old news, but we should start connecting the dots by now.
6. Marginal Profitability Calculation
“Investors love companies with scale. What this means is that investors love companies where, all things being equal, higher revenues create higher profit margins. Microsoft had wonderful scale in this manner for many, many years. Selling more copies of the same piece of software (with zero incremental costs) is a business that scales nicely. Companies that are increasing their profit percentage while they grow are capable of carrying very high valuation multiples, as future periods will have much higher earnings and free cash flow due to the cumulative effect of growth and increased profitability.”
We should start noticing by now how important the Publishing division will be for S&L. Once games are made, selling the games over time will generate more profit percentage, which in turn will create a better bottom line for the company.
7. Customer Concentration
“In their S-1, companies are required to highlight all customers that represent over 10% of their overall revenue? Why do investors care about this? Once again, all things being equal, you would rather have a highly fragmented customer base versus a highly concentrated one. Customers that represent a large percentage of your revenue have “market power” that is likely to result in pricing, feature, or service demands over time. And because of your dependence on said customer, you are likely to be responsive to those requests, which in the long run will negatively impact discounted cash flows. You also have an obvious issue if your top 2-5 customers can organize against you. “
This is pure conjecture in my part, so feel free to correct me if I am mistaken.
Again, let’s ask ourselves an important question here: “who are the customers of S&L?” Let’s see if we can identify them:
1. The individual customers who enter their locations, and buy in store or online.
2. The big box retailers who buy games through S&L due to their exclusive distribution rights or simple good service.
3. Other places which buy games through S&L but are not necessarily big box retailers. Examples: other game board cafes, or any location interested in buying board games.
While it is easy to see that S&L caters to many customers, it is not so easy to see how concentrated they are as of yet. Still, we must consider that we are still observing how the foundations are being laid, and even now we can see that management has tried to cater to as many customers as possible.
8. Major Partner Dependencies
“Investors will discount the price/revenue valuation of any company that is heavily dependent on another partner is some way or form. A high profile example of this is Demand Media’s reliance on the best seo stuff. Google isn’t the customer per se, but they can heavily impact the outcomes for Demand. And even if they don’t impact them (the recent quarter was in line with expectations), the mere awareness that they could, can have drastic impact on long-term valuation, and therefore price/revenue multiple.”
“These strong dependencies eat away at investors simply because the company is exposed to issues that are out of the control of management. As an example, Kayak’s potential IPO buyers will need to get comfortable with Google’s acquisition of ITA, Kayak’s use of ITA, and whether or not Google goes from being a source of traffic to a competitor. Likewise, if and when Zynga files for an IPO, new investors will be inherently betting on whether or not Zynga’s Facebook dependency is a positive or a negative. No one wants a partner policy or algorithm change to have unpredicted negative impacts on a public company. These risks are accounted for with lower valuation multiples.”
As for S&L, the distribution branch is one of its biggest money earners. While S&L does not have any partnership which can negatively impact their earnings, a large part of the earnings are produced by the distribution side. This means that some quarters will be much more profitable than others. Something to be aware of is how management will try to balance this in order to maximize profits.
9. Organic Demand vs. Heavy Marketing Spend
“All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple. Think about this simplistic example. There are two stores in the middle of town. One has a product/service that customers love, and as a result, customers flock to the store day in and day out all on their own. These customers then tell other potential customers, and through this “word of mouth” process, the customer base grows even larger. The second storeowner advertises frequently, and all new customers are a result of this advertisement and promotion (which obviously costs $$). Which business would you prefer to own?”
It is easy to see how the S&L business model so closely resembles the organic design. They do not need to spend heavily on marketing because their customers will do it for them. Once customers go through the door and live the experience on their own, they will tell others to do the same. Furthermore, this is a proven business model for S&L.
10. Growth
“Nothing contributes to a higher valuation multiple like good ole’ growth. Obviously, the faster you are growing, the larger, and larger future revenues and cash flows will be, which has direct implications for a DCF. High growth also implies that a company has tapped into a powerful new market opportunity, where customer demand is seemingly insatiable. As a result, there is typically a very strong correlation between growth and valuation multiples, including the price/revenue multiple.”
Is Snakes&Lattes growing? Consider that the company was bought 2 years ago, on the brink of bankruptcy. It now has 3 locations, with the 4th set to open in mere weeks, a new distribution division, a new publishing division, and set to have locations in the double digits by this time next year.
Is Snakes&Lattes growing? I believe so, and at an incredible pace if I may add.
It is extremely hard to see know at which multiple a company should trade in. But at least we can see that S&L (and by necessity AMFE) share many of the characteristics desired in a company which does trade at a 10x multiple.
Your argument seems sound...on the surface. But when you break it down, it doesn’t add up.
First question:
How do you know how these companies operate?
Building on the first question:
If you do not know how RBSM operates, why do you think that this is not commonplace?
I can also allow for some assumptions of my own.
There are any number of reasons which could justify RBSM not meeting their own deadlines:
1) Not having a full team working on a small company audit
2) being human, having underestimated the scope of the business and the time needed to work with it
3) Providing a quick “eagle eye” answer to the client (Roger) instead of providing him with a thorough one
Etc etc.
In short, I am willing to give Roger the benefit of the doubt. Why? Because I can see the MANY areas where he is helping the company grow. And that is what I am invested in.
Thats the beauty of AMFE. You don’t need to trust the numbers, you can trust the brick and mortar locations!
Nah buddy. Would you rather get free stocks on a pinky or free stocks on the QB?
I know you are impatient, we all are, but we have waited this long. It will pay off.
Thank you for recognizing the truth :)
I think you are right, in the stinky Pinks, the fundamentals do not matter.
Then why do people remain “long” here?
Because we know that AMFE won’t remain in the Pinks forever, and it will be MUCH more expensive to buy in in the future than it is now.
If anything this should be the biggest buy signal for all:
AMFE is very cheap now, but it won’t remain this cheap forever. The stock WILL go up...why? Because it HAS to.
As more locations come up, as more distribution deals come up, as more publishing deals come up, the revenues will continue to grow.
What we are seeing now is a company that is growing at a very quick pace, and THAT is what we are invested in. In its growth.
I don’t think that has been disclosed. Maybe because what we are seeing now are joint ventures and not franchises per se.
If I’m mistaken, please someone let me know.
I think we have to take everything in context.
Before, when “soon” was used, there was also an expectation of it coming within a few days weeks etc.
In that letter, the CEO recognized from the start that such an expectation could not be provided.