Coming off of a year with sales of $99.8 million and net income of $4.2 million, representatives for Author Solutions Inc. are looking for a buyer for the self-publishing giant. According to the offering memorandum, majority owner Bertram Capital, which made its first investment in ASI in 2007, is interesting in “pursuing a liquidity event as part of the normal investment cycle.”
ASI’s projections for future growth could entice a new buyer--be it another equity firm or an industry player (Amazon, Ingram?)--with sales in 2015 forecast to hit $179.6 million and net income to jump to $19.2 million. For 2012, ASI sees sales rising to $110 million and net income increasing to $7.0 million. In 2011, sales rose 13% over 2010 and the company posted its first profitable year. Since 2008, sales rose from $41.5 million with adjusted EBITDA increasing from a loss of $7.4 million to positive EBITDA of $12.2 million in 2011. ASI sees growth coming from continued expansion in the domestic self-publishing market, international expansion and leveraging its expertise into “other content forms.”
in 2011, ASI generated about 63% of its revenue from what it calls publishing and marketing services and 37% from distribution services. One strong growth areas was ASI’s partnerships with traditional publishers that generated sales of $15.6 million in 2011, a 170% increase over 2010, and are projected to rise to over $23 million in 2012. E-book sales jumped 550% last year, but accounted for only $1.3 million. International sales hit $10 million last year led by sales in the U.K. where revenue was $7.1 million, followed by sales in Australia/New Zealand where sales were $2.4 million.
ASI believes that the January launch of Booktango, its free, do-it-yourself platform to create e-books with spur sales; while Booktango is free, ASI believes it will generate meaningful sales from selling an a la carte set of publishing and marketing services. New “products” launched in 2011 included a television advertising service that resulted in revenue of $1.7 million and Hollywood services that generated over $3.5 million. According to ASI, of the 300 authors who pitched books to entertainment executives, 90 have received at least one request for the book to be further reviewed and two titles have been optioned.
On the cost side, ASI said it paid out $1.7 million in royalties to its “white label” (traditional publishing) partners last year. Its workforce totals 1,565 full-time employees with by far the greatest number, 1,215, located at its facilities in the Philippines which handles not only production but sales and marketing as well. ASI had $11.9 million in customer acquisition costs last year and said that of the 475,000 “leads” it generated in 2011 (with leads defined as an inquiry from an individual who provides ASI with and an e-mail address and phone number and asks to be contacted by an ASI rep), it converted 5% to customers. The average cost was $550 with “first order” sales averaging $1,375 per customer. ASI estimates the “lifetime value” of an author relationship to generate $5,000 for the company. In 2011 ASI sold 27,500 publishing packages, up by only 15 compared to 2010, but the number of titles completed rose 17%, to 25,000. Based on historical trends, ASI projects that packages sold will increase to 30,700 in 2012 and to 49,015 in 2015, while completed titles will rise to 27,400 this year and 44,811 in 2015,
Since its launch, ASI has published 170,000 titles from 140,000 authors, and said it has a 90% satisfaction rate, with 20% of sales coming from repeat customers and 10% from referrals.
