AMST: Advanced technology company specializing in creating Learning Community Environments poised to disrupt the industry. The near-term potential exists for generating high-margin, recurring revenues
NASDAQ:AMST
Overview
Amesite Inc. (NASDAQ:AMST) is an advanced technology artificial intelligence (AI) software company offering a cloud-based platform and content creation services for businesses, universities, government, and non-profit organizations. Amesite uses artificial intelligence technologies to provide customized environments for learners, easy-to-manage interfaces for instructors, and greater accessibility for learners in these markets. The company leverages existing institutional infrastructures, adding mass customization and cutting-edge AI technology to provide cost-effective, scalable and engaging experiences for learners anywhere. Businesses need learning and development platforms to upskill workers, to improve retention and enable them to achieve their goals.
The company enables organizations to deliver learning experiences for their constituents by using the organizations own materials, materials created by Amesite, or materials licensed from third parties. The company provides whole-enterprise solutions and also provides solutions alongside other eLearning platforms currently in place with customers and it can roll out these solutions in as little as 24 hours.
The company was founded in 2017 and is currently led by seasoned technology executive Ann Marie Sastry. Amesite went public in September 2020 raising $12.8 million in net proceeds. The company’s Software-as-a-service (SaaS) model targets a stable level of high margin recurring revenues. 2022 is expected be a growth year in terms of significantly higher revenues and the company has taken key steps to reduce its burn rate.
Strategy
The company delivers custom-branded Learning Community Environments (LCEs) to businesses and educational institutions that enable them to offer branded learning products to their employees or students. This differs from traditional Learning Management Systems (LMSs) which have typically been stand-alone software platforms focused on supporting on-grown learning but do not offer comprehensive interactivity, machine-learning, automation, and real-time data use.
Amesite’s model provides flexibility for their customers in which customers can license the Amesite platform and contract with the company to create and maintain customized learning products, license content from third parties, or easily launch their own learning products on the platform.
The company is able to use proprietary data that is collected on learner behavior and, to deliver to learners engaging, effective courses and programs. Amesite’s customers gain efficiency, flexibility and can generate high return on investment and revenue through an Amesite relationship because of the speed, flexibility, effectiveness and scalability of the LCEs that is created for the customer.
Businesses need learning systems like Amesite’s LCE to help them upskill people quickly and efficiently. Retention and execution of strategic plans require that employees stay engaged and learn effectively. In addition, universities, governmental entities, and non-profit organizations need to be able to launch programs that upskill their employees in an effective and scalable matter.
The business model enables high levels of scalability and SaaS type high margin recurring revenues typical in that industry. Though traditional setup fees Amesite delivers custom, enterprise-wide systems, as well as specialized or technical programs that are branded to the customer. The model also allows for Amesite to build technical introductory, general-interest courses and programs with the customers own content which can generate course creation fees. Maintenance fees are also common in the business model to allow customers to deliver the latest and most current topics and technologies on the market. Lastly, and perhaps most important, many of the company’s customers pay user fees based on employees or students utilizing the services which also enables course monitoring and improves customer service by leveraging the infrastructure that supports continued growth.
Technology
The company utilizes artificial intelligence to achieve improved engagement, and continuous integration of current, qualified information into our learning products. The technology utilizes a flexible and scalable full stack solution, with comprehensive tools powering functionality that is easy to use by using front-end design that uses the language of social media to deliver a familiar, easy to use interface. The code architecture offers exceptional accessibility and agility for engineers, using best-in-class programming languages for both client and server-side functions.
The core architecture enables the company to utilize artificial intelligence algorithms to ultimately improve learning outcomes. Similar to how artificial intelligence algorithms presently recognize and respond to natural language on commercial platforms, predict behaviors and deliver suggestions – Amesite’s algorithms have been developed to assist learners in accessing, utilizing and remaining engaged with platform content, their instructors and their peers.
The company utilizes learner data in order to improve learning outcomes for its customers. Learner data are collected with all relevant permission processes, and then information about learner behavior, study preferences, and material preferences can be used to improve learning outcomes and learner experiences.
The core technology validates algorithms using both offline and online testing. By correlating learner behaviors with specific outcomes as identified by qualified instructors, the company’s technology processes will train their algorithms specifically for important learning outcomes.
The company believes that the combinations of information that will be collected through the educational products, and outcomes measured using our online learning products are unique to the industry and provides for a constantly improving product offering. The company has been very clear that it does not sell or distribute this data without permission and the technology and data collection is used solely for internal product development.
Market Opportunity
The industry opportunity for Amesite is large and growing rapidly. Some key vertical markets include Business in which corporate training is estimated to a $333 billion market that could grow to approximately $500 billion of the next 10 years. In todays highly competitive and dynamic business world, these organization must rapidly upskill employees and smoothly launch large training programs. This country’s 6,000 colleges and universities provide a logical opportunity for the company’s products and services. Total revenue generated by degree granting institutions in the U.S exceeds $700 billion and the specific addressable market for the company is approximately $78 billion and growing at double digit rates.
Foundations, institutes, and museums represent another large and growing opportunity that is currently estimated at $16.3 billion and also growing at double digit rates. These organizations must deliver teacher and student learning and engagement and drive revenue with donor eLearning engagements. Lastly, federal, state and local governments offer another avenue of growth as efficiency and retention is typically a strong focus for governmental entities. For example, the U.S. Department of Labor annual training budget on its own is $3.6 billion.
Although it's hard to place a total, or comprehensive dollar market size where the company operates, it’s safe to say it exceeds $1 trillion, particularly when taking in account verticals Amesite has not explored yet.
Partners
Although still a young company, Amesite has developed an impressive customer base and partnerships with many prominent organizations in the U.S. Some of these include The Henry Ford Foundation, Wayne State University, The Ronald Reagan Presidential Foundation and Institute, and Michigan Works! Southeast just to name a few.
In January of this year, Amesite announce a partnership with famed investment manager Cathie Wood's Innovation Foundation. Amesite built the foundation’s online learning platform called Innovation Foundation Engage. The foundations plan is to partner with school districts around the country and offer teachers and children the training and education in order to for them to benefit from the changes happening in technology innovation.
More recently, the company announced they were partnering with the City University of New York (CUNY) to develop and implement professional learning on a university branded learning portal. CUNY is the largest urban public university in the U.S., providing learning to over 500,000 learners every year. The company also announced they were partnering with Conner Prairie, a living history museum located in Indiana, to deliver eLearning powered by a new online ecosystem, with an anticipated launch in 2022. The company also announced they were extending their relationship with Wayne State University, the third largest university in Michigan, for three years. The company continues to deliver professional certificate programs on Wayne State University’s LCE.
Microsoft Partnership
Amesite’s V5 platform is now on Microsoft Azure cloud system which delivers speed, scalability and world-class infrastructure. A custom branded, enterprise scale learning system can be delivered in 24 hours or less. Thousands of APIs can be integrated with Amesite’s platform because the company uses a modern tech stack and is fully modularized. The company has achieved 98% retention rates across all products which demonstrates that Amesite’s customers deliver learning products that work for their users. For more on the Microsoft Azure collaboration, an article was written by Microsoft explaining in detail the benefits of this partnership.
Financial Review
The company’s operations commenced in late 2017 and spent the first several years in research and development mode. For the fiscal year ending 6/30/20, nominal revenues were generated and the company’s burn rate was $3.6 million. For the following fiscal year ending 6/30/21, the company generated revenues of $674,000 and the annual burn rate increased to $6.2 million as company continued to hire staff and develop its platform. For the nine-month period ending 3/31/22, revenues were $539,000 and the burn rate was $5.6 million. The company reduced full-time staff by 23% between the 2nd quarter and 3rd quarter in order to reduce the level of cash used in operations. The 3rd quarter cash burn declined to $1.35 million, a 13.5% decrease from the prior year period, and the lowest burn rate since the company’s initial public offering in September 2020.
Amesite has been successful at raising equity in the capital markets. The company raised $6.7 million in FY 2020, $12.8 million in FY 2021, and $3.9 million for the first nine months of FY 2022. As of 3/31/22, the company had $8.9 million in cash and no outstanding debt. In August 2021, the company entered into a purchase agreement with Lincoln Park Capital Fund under which the company may sell to Lincoln Park up to additional $15.0 million worth of common stock. The agreement ends in August 2023 and there is still $15 million in available shares that Amesite can sell to Lincoln Park.
Management
The company is led by Ann Marie Sastry who is founder and CEO of Amesite. Dr. Sastry started the company to address the important challenge delivering effective online learning that engages, educates, and enables people to advance economically. Dr. Sastry was previously President, CEO, Board Director and co-Founder of Sakti3, recognized as one of MIT’s 50 Smartest Companies (2015), and as a Crain’s Detroit Business Cool Places to Work winner (2017). The company was acquired by Dyson in 2015 for $90 million. Sastry was invited to the White House in 2015 to be recognized for her technology entrepreneurship and to meet with President Barack Obama. Her technology and business work have been featured in WSJ, Fortune, Forbes, The Economist, USA Today, The New York Times and on the cover of Inc.
Summary
We believe investors may not be recognizing Amesite’s potential to generate significant amounts of high margin, recurring revenues. The company has created a unique and proprietary artificial intelligence driven platform that it believes clearly sets it apart from the competition. Amesite participates in all aspects of the e-learning landscape by being able to offer immediate, turnkey platform solutions by utilizing a customer’s own content, yet is also able to create content specific solutions for customers that improve the e-learning experience. The company believes that its concept of a Learning Community Environment has the potential to disrupt the traditional Learning Management System ecosystem by improving on learning outcomes and retention rates that the industry hasn’t seen before.
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