Amp’d Bankruptcy: By The Numbers: ‘Liquidity Crisis’ Due, In Part, To 80,000 Non-Paying Customers
When a company files for bankruptcy, details that have been kept on the inside — or sometimes provided without any way for the the listener to verify, suddenly become available as the company tries to justify the filing and its need for various approvals. Amp’d Mobile needs permission to use its bank accounts, to pay salaries, to do everything that keeping a company running during bankruptcy entails. Monday’s filings in U.S. Bankruptcy Court for the District of Delaware, the first follow-up to the actual bankruptcy petition filed late Friday, include subscription numbers, funding amounts, spending and more:
– Amp’d raised a total of about $350 million in equity investment through June 1 and approximately $31 million of secured and unsecured debt investments. Kings Road Investment holds an April 2 promissory note in the amount of $30 million.
– Customer acquisition was “extremely low” following the December 2005 launch and through the first half of 2006; an aggressive ad campaign helped lead to a boost in subscribers. Amp’d hit about 100,000 subs by the end of 2006 with “unprecedented growth” from November ’06 through February ’07. (I have not yet seen a current subscriber total.) A source familiar with the situation says Amp’d had more than 200,000 subs at the time of the filing.
– That dovetailed with customer collection items “at rates higher than industry norms.” Approximately 90 percent of the customers were on 18-month contracts. “The debtor began to find a host of credit and collections problems and contributed ultimately to a liquidity crisis.” By late May, the company realized its non-paying customers approached 80,000.
– The bi-monthly (the filing says bi-monthly; it’s twice monthly) payroll for some 229 U.S. employees averages approximately $987,000 — nearly $2 million a month. (I’ve confirmed this with a source familiar with the numbers.) Monthly employee expenses run $175-200,000. Health benefits run about $119,000 a month; various insurance benefits run $5,000 a month. As of the petition date, the company estimates it owed less than $70,000 with no one employee scheduled to get more than $10,000. Just over $37,000 in employee 401K funds have yet to be paid; that’s one of the things the company wants approval to do.
– Amp’d estimates that it has no less than $6 million in accrued but unpaid sales, use and other taxes.
– As of June 1, the company held $992,000 in unused airtime for prepaid plans and customers are owed $778,000 in rebates.
– Amp’d has been averaging $500,000 a month on product protection and replacement plans. Customers owe a total of $2 million in program fees.
– Amp’d served more than four million games, videos and songs in 1Q07, more than twice the amount of the previous quarter. Overall, the company has delivered more than 6 million downloads.
Update: Finally had time to check out Kings Road Investments; it’s a wholly owned subsidiary of Polygon Global Opportunities Master Fund. Polygon first invested in Amp’d as part of the $150 million third round. I would not be surprised to see Polygon provide the Debtor-in-Possession (DIP) funding.
Update II: About the 80,000 non-paying subs. Given what we know of Amp’d's billing issues, the better question may be how many were billed at all.
where is the filing – is it online?
If that's really the bi-monthly payroll, it would be nearly $500,000 a month. You probably meant bi-weekly.
We are using PACER, a federal filing system, to obtain the documents; they aren't freely available online. http://pacer.psc.uscourts.gov/
On the pay question, I was looking at that again and then saw your note. The affidavit says bi-monthly but the way it was worded suggested twice a month. I'm going to strike through the second part of that until I can clarify. Thanks.
The number of non-paying customers is a juicy nugget. Good find. I think this may be the death knell for Amp'd. Better credit policies will slow growth. I always wondered how Amp'd's young target audience could afford the high ARPU Amp'd was touting. I guess the answer is they couldn't. Check out the Ad-Supported Music Central blog:
http://ad-supported-music.blogspot.com/
This really is an incredible set of numbers. How could the VC's be so incredulously blind to the numbers of the business whilst pumping in millions upon millions of dollars? Didnt the numbers actually communicate anything to these seasoned, learned professionals? The demog of AMP'd and other youth targeted MVNO's and mobile businesses on the whole lends itself to bad debt. Wasn't this in the business plan? Wasn't the risk outlined or did stakeholders overlook the risk? I would say that this unfortunate situation comes down to mismanagement and allocation of VC funds. 220 staff at $1m in payroll needs income of double that to support the basic model. Where did they think they were going to get it from? Profits too lean and ultimate non-control of the network (VZW) means a uphill push until breaking point.
For those of you that don't fully understand what actually happens at the retail level in wireless, note that a "non-paying customer" is more often an "enterprising" independent retailer or distributor that is gaming the sales incentive system by preactivating phones to generate the competitively high commissions that were being paid to generate the sales. It is a double edge sword – without paying a higher commission, Amp'd could not get the shelf space or salesperson's attention. With it, it invites the vultures for a feeding frenzy.
Amp'd never had a sub base of 175,000. Subscribers pay you. The reality was they only had 95,000 subs. Considering they have apparently gone through around $350M plus owing another $100M to gain 175,000 of sign-ups, it has cost Amp'd around $2600 per sub (or non-sub)! At those sorts of acquisition costs, how could anyone think there was a business there? How dumb are the VC's to have not discovered those sort of flawed basics? Unless, the books were being cooked.
I didnt get billed for my dealer line till I called the company. The idea of text messaging and emailing bills was a disaster. I think that many subs never got billed and probably thought they had a free ride. You cant hand these guys a $700 bill months after activation. The company had a product that was liked and was popular. It should survive in some form. At this point if they start over, they have a working technology that took alot of money and time to develop, and they may even have about 100k active paying customers. They decided in February to slow down paying commissions so they would have money for some phones. They really needed to get their billing and commission software working. Should be interesting to see if Verizon shuts off service.
You mean I gots ta pay muh ma fin bill? what 'chew trippin foo'
I'd rather pay off muh ma fuckin drug dealerthen pay amp'd! all ye damn hood ratz..
When uh company files fo' bankruptcy, details dat gots been kept on da inside-or sometimes provided without any way fo' da the listener ta verify, suddenly become available as da company tries ta justify da filing an' its need fo' various approvals. Amp’d Mobile needs permission ta use its bank accounts, ta pay salaries, ta do everything dat keeping uh company running during bankruptcy entails. Monday’s filings in U.S. Bankruptcy Court fo' da District o' Delaware, da first follow-up ta da actual bankruptcy petition filed late Friday, include subscription numbers, funding amounts, spending an' more:
– Amp’d raised uh total o' about $350 million in equity investment through June 1 an' approximately $31 million o' secured an' unsecured debt investments. Kings Road Investment holds an April 2 promissory note in da amount o' $30 million.
– Customer acquisition wuz “extremely low” following da December 2005 launch an' through da first half o' 2006; an aggressive ad campaign helped lead ta uh boost in subscribers. Amp’d hit about 100,000 subs by da end o' 2006 wiff “unprecedented growth” from November ’06 through February ’07. (I gots not yet seen uh current subscriber total.) A source familiar wiff da shit says Amp’d had mo' than 200,000 subs at da tyme o' da filing.
– That dovetailed wiff customer collection items “at rates higher than industry norms.” Approximately 90 percent o' da customers wuz on 18-month contracts. “The debtor began ta find uh host o' credit an' collections problems an' contributed ultimately ta uh liquidity crisis.” By late May, da company realized its non-paying customers approached 80,000.
– The bi-monthly (the filing says bi-monthly; it’s twice monthly) payroll fo' some 229 U.S. employees averages approximately $987,000-nearly $2 million uh month. (I’ve confirmed dis here wiff uh source familiar wiff da numbers.) Monthly employee expenses run $175-200,000. Health benefits run about $119,000 uh month; various insurance benefits run $5,000 uh month. As o' da petition date, da company estimates it owed less than $70,000 wiff nahh one employee scheduled ta git mo' than $10,000. Just over $37,000 in employee 401K funds gots yet ta be paid; that’s one o' da things da company wants approval ta do.
– Amp’d estimates dat it has nahh less than $6 million in accrued but unpaid sales, use an' other taxes.
– As o' June 1, da company held $992,000 in unused airtime fo' prepaid plans an' customers iz owed $778,000 in rebates.
– Amp’d has been averaging $500,000 uh month on product protection an' replacement plans. Customers owe uh total o' $2 million in program fees.
– Amp’d served mo' than four million games, videos an' songs in 1Q07, mo' than twice da amount o' da previous quarter. Overall, da company has delivered mo' than 6 million downloads.
Update: Finally had tyme ta check out Kings Road Investments; it’s uh wholly owned subsidiary o' Polygon Global Opportunities Master Fund. Polygon first invested in Amp’d as part o' da $150 million third round. I would not be surprised ta see Polygon provide da Debtor-in-Possession (DIP) funding.
Update II: About da 80,000 non-paying subs. Given what we's know o' Amp’d's billing issues, da bettah queshun may be how many wuz billed at all.
Don't make me come ovah there bitch…