A response by someone who doesn't post here but knows a lot about the company and sent this to me.
"Worried about the net loss for Amfil? Not me.
I know some say that Morning has been a disaster for Amfil so far. Amfil bought them and then fulfilled the Kickstarter commitments even though they were not obligated to do so. Did this cost us potential profit? Yes. Could the first games made gone to Walmart instead and brought us revenue and gains? Yes. Are we showing a loss for Morning in 2018 and 2019 on the annual reports? Yes! But what we did will give us credibility and allow us to do FUTURE kickstarter programs. Roger is looking towards the future, and willing to take a loss now to ensure larger profits down the road. Does that make it hard short term on the finances. You bet. But sometimes doing the right thing costs you in the short term. In the end, it pays off, but for now, yes Morning shows a loss. So what! When we have years and years of games hit the market at profits, the short term loss in 2020 shall be seen to be a smart move. If others feel that we should have stiffed the kickstarters that backed the game? Well, that is their shortcoming they have to deal with, and why they are not CEOs of successful companies.
Next is our new venues showing losses short term, but gains long term. Midtown gave a loss for the 2019 year, thanks to costs and building up of the location. remember that FY2019 ended i June 2019, and started July 1, 2018, when Midtown was still pretty new. Tempe was even moreso a loss in FY2019, as it was built out during the first quarter and opened in 2nd Qtr but took time to get a clientele built up. The first months were much lower in customers than where it is now, and just two weekends ago, during parent's weekend, Tempe had a new milestone on revenues that it had never hit before. I think many new milestones lay ahead. Goodbuddy was there this past weekend. He saw how it was half full at 5PM, filled up fairly well by 6PM, and then packed by 6:30PM. As it continues to gain traction that could take years to hit its final highs, the venue should start being filled up fairly well by 5PM and packed by 5:30PM. The waiting lines that exist should be a little longer as more people come to see what a wonderful place it is. Still, even with this growth, it was a loss for FY2019. hd to be, as it started off with zero base in the 2nd quarter. It will be a gain for FY2020, and should continue as such for future years. Tucson? That one was not on FY2019 at all. It will be on FY2020, and should probably show a loss for that year. But by FY2021, that venue too should be at a nice gain. It actually looks more promising then Tempe for net profit, due to some better ratios and costs. It will show a loss for FY2020 though, especially with the delays in opening. The Morning KS fulfillment and the new venues show us a loss for 2018 and 2019. positive earnings. That is the way it works when you open new locations and new concepts in new cities. NOT a problem to have losses the first year. Especially not when you see how all your prior venues turned positive after the first year and are positive still today.
Speaking of Tempe and Tucson, both have been confirmed to be 100% corporate owned, in spite of rumors to the contrary. The first announcement that Tempe was being built did not mention it was corporate owned, but that was because it was assumed everyone would know that since it said it was just funded by a private person. When I bought my house, I funded it through my local bank. I still "own" it, but I have a mortgage on the house. No one would say that the bank owns my house. Not yet at least!. The same thing is true with Tempe. The difference is that instead of Snakes going to the local bank to fund the venue, they went to a private investor. That investor gave the money for the build out instead of a bank. That was funding, not a joint partnership. Not a franchise, since that is not allowed until the audits are up to date. When some questioned whether the location was owned by that investor or truly owned by the company, Roger made it very clear that it is corporate owned. Period. The fact that it was not stated in the original release was clarified, and if some still won't accept that it is corporate owned, then Roger can say no more, since he has now said more than once specifically that Tempe AND Tucson are at this time corporate owned. Who knows after the audits are updated. Maybe they turn into franchises. Maybe they do not. But right now, they are corporate owned, and have been stated by the company to be so. Was anything filed showing the arrangement with the financier? Nope, since it was only a corporation opening a new location. That does not qualify to need a filing. Same with Tucson. Released to be corporate owned, and it is as of this date. I can also say that Denver and Fort Collins are also already confirmed to be corporate owned when they open, funded by the same investor, again as a funding and not as an ownership position. They haven't even been announced yet, since locations have not been confirmed so there is nothing firm about them yet, but a visit has been made to both cities by the company and the funder, and locations are being scouted. Whether Snakes uses a local bank or a local person to fund a location is irrelevant and does not require any special reporting when the locations are opened, again as corporate owned locations.
I imagine that new locations will continue to be negative to earnings when they open for the first year. However, when you go from 3 to 4 locations or even 4 to 7, that means a large percentage of your venues are new and bringing in losses. As you grow, and then go from say 20 to 28 venues, that will mean 20 older ones all bringing positive earnings and only 8 bringing negative the first year, and the overall earnings should be positive. Not to mention that the next year, 28 locations should be positive. A bright future, all paid for by the losses incurred as the new locations open. Standard operating procedure! Again a reason to not be worried about negative earnings at this early stage. Growth costs money, and for a period of time that means negative returns.
Finally, yes the comparison to larger companies like Amazon are valid; not to say we will ever be that big, but to show that the concept of growing and having negative earnings while young is fine as long as there is a plan for positive earnings in the future. FUNN definitely HAS that plan, with the venues making money after being opened a while, Morning just starting to turn profits in FY2020, and who knows - maybe even some sales from Gro3.
So am I concerned over the losses for now? No. I'd be concerned if they didn't go into the red to grow by adding new locations and adding new games, and expanding out to buy Morning, and doing all they are doing, because then they would be stagnant. They are not stagnant, but growing, and the FUTURE earnings look brighter BECAUSE they are currently spending money and taking a short term loss to secure that future.
That's why I won't fret over those who are wringing their hands over losses at this time. We have funders, we have backers, Roger even mentioned some about that in his PR, and we are secure until we get to a point where we have net positive earnings. I think that is in FY2020, as Tempe goes positive, Morning goes positive, Midtown already is positive, and the next new ones aren't enough to drag us to a net loss in another quarter or two but it could be FY2021. Or maybe even less time if KTU hits big in a few weeks when it gets to Wallyworld finally."
Long, I know. But maybe it helps a little??
