Altitude Share Discussion Threads

[northwards] 09/7/2020 20:33

Gjk - your missing the crucial point that at present aim suppliers only cover around 30 percent of the c 780m dollar aim distributor spend. Hence aim commissions / rebates currently of c 10m pa. But the percentage coverage should be steadily increasing, as should our commission rate a little.

[gjk0268] 09/7/2020 20:17

You did but your calculation ended with 3.6m when it should be 36m. $1.2b x 65%= $780m. Multiply by 6% = $46.8m. Allow for currency exchange @1.3 = £36m. Hope you now agree cheers

[thebigshortfella] 09/7/2020 19:53

gjk0268 - that’s what I quoted in my earlier posts and also calculated my numbers from. If my calculations are right the numbers are not amazing. Would love to be wrong tho! 🙌🙏

[gjk0268] 09/7/2020 18:56

“We estimate that AIM members currently place approximately $1.2bn of purchase orders annually through suppliers of which approximately 60% to 70% is addressable with potential preferred supplier partners in the long term.“. Found from late last year

[gjk0268] 09/7/2020 17:43

TBS....I may have missed it but I don’t think they have stated this in any of the updates

[thebigshortfella] 09/7/2020 17:18

Billster - exactly. There may be a completely valid explanation(s). This was not the time for them to be less expansive explaining the reasons behind the slightly falling members and static suppliers.

[thebigshortfella] 09/7/2020 17:13

gjk0268 - great - thanks! Please could you do me a favour and show me the calculation for what ALT are predicting the could potentially make from VIP suppliers. Thanks!

[billster2018] 09/7/2020 17:10

I agree, so my question was previously, why did they lose members? In every previous update, membership was growing. Did some of them just give up during COVID, go bust? Or did they actually leave and if so, why? This was the first quarter of a failing membership base, all next it with a slight increase in member revs.

[gjk0268] 09/7/2020 16:59

the 2.13b includes the distributors profit plus non promotional goods that they cannot make fee earning (mentioned in a previous update) …..energy supplies etc. You are then left with the suppliers costs that they can work with

[thebigshortfella] 09/7/2020 16:57

Billster - I'm not so sure. This is meant to be a scaleable business in order to increase revenues. But if they are not adding new members over 6 months, it's not scaling. This is why I want to get to the bottom of how their revenue model works. My gut feel is that significant increases in revenue are far from guaranteed (ALT appear to not be great at execution) and the model does not appear to be a massive growing cash cow either (but it could be down to my misunderstanding). I would love to be proved wrong, as I would also love for the market to be wrong and for me to pile in!

gjk0268 - Ah! Got you.

Northwards - Is there someone at ALT we can ask about this?

[northwards] 09/7/2020 16:54

Big - it's a good question. I think the 1.2 billion is the gross profit of distributors - of which aim can claim a commission. But to be honest, I'm not certain.

[gjk0268] 09/7/2020 16:49

TBS ....it’s your 60m that I am questioning as it should be 600m (and then 6%of this)

[billster2018] 09/7/2020 16:46

Agreed, but interestingly, although the distributors went down the Rev number for the distributors was slightly up, I think. Which is all that really matters.

[thebigshortfella] 09/7/2020 16:39

gjk0268 – no worries. I was just using the 10% as an easy comparison to show that the 6% number was correct.

Northwards – thanks for that.

Billster – re: distributor numbers increase (as they were month on month, pre COVID)

The numbers may have been increasing but ALT stated in September 2019 that “AIM has a rapidly growing membership base with 2,185 members today”. Their update this week states “membership numbers are steady at c. 2136 AIM members”. Covid started in March. This means that they had 6 months to increase the membership numbers, but they actually fell slightly. This is the opposite to what I would have expected.

I don’t disagree with your point though Billster. The two obvious opportunities that they have to grow revenues are:

“AIM has approximately 10% of US distributors”, so ALT could potentially add more

“Approximately 76% of transactions are carried out offline. This percentage increases to approximately 90% for smaller distributors who comprise approximately 42% of the market.” By providing websites and marketing solutions to distributors, they can help push some of that 76% online, where they can potentially monetise it.

But, both of these are not guaranteed and both require a strategy and execution.

This is a good discussion as we need to understand how their model works.

The confusion about their revenues stems from two statements made in September 2019. The first was within the 5th Sept trading update:

“AIM Smarter (formerly AI Mastermind) has integrated well under Group ownership and continues to grow adding a further 268 members since the acquisition bringing the total to 2,185 with aggregate revenues of $2.13bn (up from $1.9bn), increases of 14% and 12.1% respectively.”

In the 30th September 2019 interim results update, they stated:

“We estimate that AIM members currently place approximately $1.2bn of purchase orders annually through suppliers of which approximately 60% to 70% is addressable with potential preferred supplier partners in the long term.”

Please excuse my ignorance and there may be a completely valid reason, but can anyone explain the difference between “aggregate revenues of $2.13bn” and “approximately $1.2bn of purchase orders annually”? I’m clearly missing something. Is it the profit for the distributors as Billster highlights?

[billster2018] 09/7/2020 16:22

Agreed, but 2.3bln is higher than previous numbers and I am just working that number backwards. So 60% of 2.3bln. By the way, I have no clue on the actual markups the distributors take.

[gjk0268] 09/7/2020 16:09

Billster… I think the 2.3b includes the profit for the distributors hence the reduced starting figure

[billster2018] 09/7/2020 16:01

BSF is it not 6% of 75% of 1.2bln, no? Eg 54mln USD. Or on today’s numbers, it is more like (2.3bln x .6) x .75 = 1.035bln. Then 6% of that, which is about 62mln USD. Have I missed something?

I agree on the Mr Market point, but the market does also get things wrong, especially when they are reported this badly and no one understands the model.

[gjk0268] 09/7/2020 15:56

sorry TBS I thought you were saying 60% of the $1.2B is potentially "fee earning". this equates to $720m. hence 6% of is $43m (then divide by exchange rate)
I don't know why you are saying 60m

[northwards] 09/7/2020 15:55

Looking back over broker notes, I think it's currently 28 percent of 60 percent of 1.2 billion at say 4 percent commission. So about 8 million dollar commission to aim from preferred suppliers on pre Covid estimates.Obviously in time the 28 percent should move to 50-60 percent. And commission margin may nudge up.

[tjbird] 09/7/2020 15:53

Dont argue with Mr market who sauys this is fuct

[thebigshortfella] 09/7/2020 15:44

gjk0268 - Thanks for challenging. A quick check, 10% of £60 million is £6 million. We are looking for 6%, so £3.6 million is right.

[billster2018] 09/7/2020 15:43

That is how I think or assume the model works and obviously as revs increase and distributor numbers increase (as they were month on month, pre COVID) the pot they can take from increases.

I would add that if they get this right, which at present is a big the net margin and multiple attributed to such a business should be very high. Also averaging down.

[tjbird] 09/7/2020 15:36

Bad debt is coming

[kemche] 09/7/2020 15:33

BSF - I suspect the cheerleader here will not really want to talk about that.

But please let's discuss "averaging down".