All right, everyone. I would like to introduce Todd Furniss, CEO of AIAI Holdings. Welcome.
Thank you. That's the warmest response I've gotten in years. I have only done about 250 of these presentations, and it's very abnormal for me to actually use a deck. Unless you guys want to use the deck and go through every single slide, I'll avoid doing that. One of the things that I have been charged with is having an extremely complicated business model. I don't think it's complicated. I'm going to start with the end, and then we'll go backwards, and I'll fill in the color in between. The question is, what does AIAI Holdings Corporation do? And the simple answer is, we buy companies, we retain the management teams, and then we use our newly acquired retained management teams to deploy our technology in our newly acquired companies. That's it. We're finished.
The difference in our model is we don't sell any services or license any software to any third parties. What we do is we use our technology exclusively for our own companies. And we have proprietary technologies that's fantastic. Of course, everybody would say that. But our provenance, I think, is pretty unique in that we have one of our architects is a guy named John Rochon, who's our Chairman, who happens to be the guy who worked with Geoffrey Hinton and started work on things like value laddering, which are now called neural networks, and how people actually make decisions, the psychology of making decisions. And on the other hand, we have Michael Sandoval, who's a former Nobel nominee for AI and happens to have run AI for Microsoft back in the day.
He has developed about 180 different branches of mathematics and science in order to augment the work that John did. We look at things a little bit differently. We call it non-monotonic reasoning. I would love to say that I came up with that very large word, but I did not. Non-monotonic reasoning means you can take a dynamic set of data and a dynamic set of rules and still come up with an answer. Most agentic AI or generative AI is called monotonic reasoning, which means you have to have a fixed set of rules and a fixed set of data in order to come up with an answer. And if the data changes or the rules change, then the agent has trouble. And then machine learning, which is kind of where everything started, is simply seeing patterns in data.
If you think about it, patterns in data is machine learning, patterns in data in context is generative AI, and then we do something different. A lot of our work actually started with finding bad guys. What do I mean by that? Literally, we hired a bunch of people into a nonprofit, and we find people who are engaged in human sex trafficking. So we have a nonprofit that does that work. We found that there are a lot of veterans who come in after serving overseas, and they do not really have a purpose anymore. So what we did is we said, "Well, your purpose is to be a hunter, and we are going to equip you with the technology to go hunt bad guys." So now they hunt bad guys in that organization.
I am pleased to report that we found 50 bad guys that are now in jail, and we put 150 into the good folks who are the authorities who are helping them find their way to jail. So this is very meaningful work to us. But in addition to that, we use it for other purposes when it comes to making companies capable of doing something they never conceived of before. What do I mean by that? So we take a company like our second opinion company. It is called MediGuide. Most people do not think about this because most people do not have these problems hardly ever, if at all. But let us imagine you are living in Costa Rica and you say, "Well, I have just been diagnosed with cancer." Well, that is a bad thing, obviously.
But Costa Rica, like most countries outside of the United States, are what are called single-payer nationalized health organizations. If you want a second opinion, what is going to happen? You are going to take your data to another nationalized governmental doctor, and they are going to give you the same protocol and the same answer that your first doctor gave you. In the United States , if you get a second opinion, which you are most likely not to do for odd reason, which is you do not want to piss off your doctor. You got oncology and you are worried about angering your doctor. That does not make a lot of sense, but nonetheless, it happens. So that company has relationships with 120 or so multinational insurance companies, and then we deliver this service into roughly 150 countries in 47 languages.
You might say, "Well, okay, interesting." We have changed that by virtue of our technology into a global delivery platform for healthcare services. So now we are doing things like longevity services, telehealth. We were approached by one of the largest mall developers in Saudi Arabia to do kiosks for healthcare delivery in the malls in Saudi Arabia. We are working with another one of our portfolio companies. They have a cryptocurrency called DAG, D-A-G, and we are using DAG to do cross-border payments where, particularly in high inflation environments, we can help stabilize the value exchange with the cryptocurrency. The list goes on and on. Then I guess to go one screen further, we also are working with one of the largest credit card processing companies in the world to help with preventing fraud, waste, and abuse in healthcare savings accounts payments.
What we are doing when we use our technology, again, using our newly acquired retained management teams, is we are identifying where the opportunities exist in terms of creating value inside of the company and then developing projects and then organizing them sequentially for delivery into that company. What happens is we are focused on revenue generation and innovation, which then leads to corporate growth. That is a much better message for people to hear as opposed to cost reduction, which means job loss. If I said to you, "Hey, I would like to have your help in training this agent to do your job, and by the way, when we are finished, you are not going to have a job. We do not know where you will have a job, but it is not going to be here." That is going to dissuade assistance.
Whereas by contrast, if we can say, "Hey, we are going to go grow the business, we are going to go innovate and create new service offerings, and here are five opportunities where you can professionally develop into," that is something that excites the population inside of the company. People get excited about that. They want to be a part of it. It ends up changing the friction levels inside the company, and the adoption rate is much higher and much faster. Part of our message is around speed to market. If you think about how we buy companies, you would say, first of all, or we have said publicly, we think we want to acquire companies on average 120 days after we sign the letter of intent. Well, okay, that sounds interesting. Then we want to implement our technology 120 days after we buy the company.
240 days later, after we sign the letter of intent, we are already deploying our technology. By contrast, 95% of all successful AI pilot projects are never implemented. What are they doing? They have spent all this money, perhaps wasted all this money, and the management does not put the technology into place, or it is rejected out of hand. Our model is we encourage everybody to participate. We align economic incentives. We have everybody excited about the growth and the innovation of the company. As a result, our adoption rate is far faster. By contrast, if you want to take a look at the problem from a different dimension, you say, "Well, why would not you just sell your software?" I probably had that question several times today alone. The question is, if I am doing an enterprise sale, somebody wants a CRM or an ERP, then what happens?
Somebody in middle management says to somebody in senior management, "Hey, you know what? We ought to have a new CRM." Somebody in senior management says back to that person, "That is a good idea. Write me a memo on that." Then the junior person writes the memo, and then the senior person says, "This is a really good memo. You know what we need to do? We need to get McKinsey to do a study." Then six months later and $1 million later, the study is completed, and McKinsey comes out with a conclusion that not only can you create a lot of value, but the marketplace is filled with competitors. We should do a competitive procurement. It takes two months to write the RFP. It takes two months for the responses to come back.
Sooner or later, the BAFO, best and final offer, is received. The business is awarded. Then what happens? You start negotiating the contract. That takes another 60 days from the day of the first draft. Okay. Then what happens after you sign the contract? You either start developing the implementation plan, or you have to go back through a process of reaffirming the implementation plan. This process can take two to five years. We bought the company in 120 days. Speed to market. Let's get this thing done. Now, the next question was, well, we're at the beginning, and some people in this room may say, "No, no, we're at the end. AI, everybody knows about AI. That ship has sailed." No. 50% of all businesses that are privately held today are owned by old guys like me, over 55 years.
That means there's what they call the silver tsunami of private businesses looking for their next state. Guess what? A lot of those leaders aren't quite ready to hang up their spikes. What they want to do is have a three to five-year timeline where they can kind of ease off, train up their next generation of leaders, get help with technology, and then go off into the sunset with liquidity. We give them all of that. They don't have to go public, which is very hard, and they don't have to go get sold to a private equity firm, which can decimate their culture and the culture that they maybe spent 20 years, 30 years, 40 years building. We believe that we're at the beginning of what could be a multi-decade opportunity.
There are literally no limits to the number of companies that we can work with and focus on. The question then becomes, well, Todd, if that's the case, let's assume for the moment, God forbid, you're right. What does that mean? How do you focus on the companies that you want to buy? We have something called the CURA strategy, which stands for complex, urgent, and administrative. Complex means how do I decide which aircraft to get to which gate at which terminal at which airport in which city for American Airlines? That's a complicated task given the number of variables. Urgent is how do I get this human organ from Miami to London for the purposes of transplanting it into a new human recipient.
Administrative is just a ton of data and a ton of rules, and it's difficult to figure out with just the ordinary human brain. What we do is, in that instance, it might be something like healthcare claims processing, right? Those are the companies we focus on, and then we also want to focus on companies that typically have at least $100 million in revenue and at least a 5% EBITDA margin with a pretty good EBITDA to cash conversion ratio. Now, the question would be next from the analysts in the room, if there are any, well, what should we evaluate you on? The metric that we're holding ourselves accountable for, and starting in 2027, is going to be the rate at which we compound our cash.
We buy companies, we harvest the value that we're creating, and then we redeploy that cash into other companies where we can do rinse and repeat, basically. That way, we're compounding the cash so that it's constantly productive in our model. One can say, immodestly, we're a Berkshire Hathaway with an AI cherry on top. We're using AI to fundamentally transform these companies, not only to change their cost structure, but also to generate revenue and to innovate. The question becomes, okay, tell me a little bit about who's on your team. We've got probably one of the most amazing teams for any company of any size, but certainly for one with our market cap, it's remarkable. When I look at our board, we have somebody like Jeanne Phillips, who's the former Ambassador to OECD under George W.—
—Bush, or Don Remy, who is the former Deputy Secretary of Veterans Affairs under Joe Biden, or General Tom Cosentino, who is a Brigadier General and was also the former Chief Operating Officer for the Business Executives for National Security. Those are just three of our board members. Then I come down to our management team. I kind of bring up the rear, but we've got Ken Betts, who's a former Skadden Arps securities lawyer, and then we have Stephanie Liebman, who is the former Global Controller for HP. She was a Section 16 officer for 16 years. Then Barbara Barton, who is the first person ever to be named Chief Tax Officer and Chief Accounting Officer simultaneously for a Fortune 50 company.
I would challenge anybody to give me a better management team than that, given that our market cap is probably still less than $200 million as of this moment. We've announced a couple of deals that are significant, one of which is we've announced the LOI, and it should be closing imminently. When that closes, we will have about $125 million worth of free cash going through our books. That's up from roughly zero today. I think that those of you who are either interested in investing or who are analyzing the investment would find that to be a pretty good prognosis for stock price. If you took a look at the multiple of only 10 x free cash, that would take our price to about $17.50. Our price today is somewhere around $2.30, $2.50. I haven't looked at it today. But obviously, a pretty good upside.
Nasdaq right now is trading at north of 40 x free cash. That's pretty good math. We're in the market right now. Obviously, we launched an ELOC with B. Riley about two weeks ago. We filed our S-1 on Monday of this week. It goes live today. That's our capital approach. We're also working on another bit of a private offering right now with a preferred convertible that would be, I think, very attractive for investors, where the individual investor would get preferred shares. We're trying to raise $25 million-$50 million there. It'd be a convertible preferred with a 12% PIK, and you can then convert that into shares at designated stock price. Share price is between $5 and $7. I think that's pretty attractive as well. That will produce a pretty darn good return for somebody in the 18-month period for that offering.
I am happy to take any questions if anybody has one. This good-looking fellow over here.
Thank you for that. It sounds like your technology, the way you have described it, is plug and play with a twist. You take the business, you plug it into your model, integrate it, give it a spit and polish, and come out with a more efficient business. Is that basically it?
Matt, this is the first royalty payment we are paying to Sherman. We AI-ify it. But basically, yes.
Give it a spit and polish.
Yes. And so what we do is we use our shared services organization and our IT to help bring them up to standard and to give them a whole new future. Yes.
So when you take this situation, this new business, is it a service business? Is it a product business?
None of the above. We own the companies. We don't sell anything to anybody.
No, no, but the business that you—
That we're buying
—that you input in your AI.
Is it a service business, a product business, or what kind of business is it, or does it not matter?
It doesn't matter. We have a construction business. We're looking at some deals in rare earth minerals on the mining side. Probably one of your friends at BHP, I would imagine.
With Bill Rhea, for example.
There you go. Then we have technology. Typically, they're pretty asset light. The construction company's not so asset light, but most of them are asset-light businesses. Yes, sir.
Do you have any documented increase in net revenue that is generated specifically by AI when you take these businesses over and AI-ify them?
We've been live for. We haven't gotten our six-month birthday yet, so it's a great question, but we do have products that are rolling out this week and next week, which will start showing that kind of improvement immediately. We do have case studies, and I am happy to share some of those with you independently, or you can find some of them, I think, on our website. Then we also have them in a form of a longer form, which is a white paper. Yes, sir.
This is not negative, but what about exits? Do you incorporate an exit strategy at all with any of these developments?
The question was, how are we considering exits for any of our portfolio companies? Our Chairman has typically held companies for 14 years. The idea is harvest the revenue and the EBITDA we're generating. I think that will be done on a case-by-case basis, depending upon the needs of the company and where it stands. Yes. The follow-up question.
We have been hearing a lot of doom and gloom, including at this conference on the first day, about companies having a hard time going public in micro-cap and small-cap, and how tough it has been for everyone. Is that actually working in your favor at this point, would you say? I mean, because, the next step for some of these companies instead of just keep on going to private equity all the time would be going public, or it could be the other way around. What would be kind of you?
Yeah, the question is: Is it advantageous to us that it's so difficult to go public? I wouldn't wish ill on anybody, but I would never want anybody to take a 35-year-old private construction company through a PCAOB audit, which is what we did. In order to go through a PCAOB audit, I mean, the construction company was run by a guy who's got a bigger than life personality, and he was running the company, I'm not making this up, on an Excel spreadsheet, copied and pasted into an instance of NetSuite. It was not abnormal for the support for an expense to be because he said so, which I don't know if you know this, that doesn't really work well in audits. We had to go clean that up, and that was very expensive.
I actually believe that going public is going to be harder, and it's going to get increasingly harder. I would observe that something like 92% of all publicly traded companies are audited by one of four companies. We went through this. In order to get audited, you kind of have to make your debut and come out to society, in essence. You have to basically try and get the role of audited company, and you have to pay whatever fees that they want. You're kind of held hostage. In our instance, we had to have E&Y develop our pro formas because we bought six companies simultaneously, and then we had to have Forvis audit the company, and both of them have done fantastic jobs. I am happy to recommend E&Y or Forvis all day long.
They've done magnificent work, and the individuals are just fantastic people. I am happy to give you their names if you want them. They're not paying me for that. To the contrary, I paid them to get the opportunity, but they're just fantastic. If you take a look at that, and then you take a look at the expense associated with legal and then filing fees and everything else, we spent millions of dollars going public. I could tell you, going back a couple of years, I was an investor in a bank, and the reason we sold the company was because the bank CEO said we have a choice. We can spend 100% of EBITDA next year on compliance because we're now into a next echelon of banking regs, or we can get sold today for basically a 2.5 x book value.
I think regulations are getting more complex. They are more business unfriendly. It's more and more challenging to go public. Now I feel like we're part of the fraternity because we certainly have been through the hazing part. Yes, sir.
That brings up kind of an additional concern, right? You've already made this huge capital raise of $200 million in private equity that you can take advantage of, if I remember right.
We have not raised any money yet.
No, not raised, but you have the ability to—
Yes.
—common shares to raise that money.
Yes.
Talking about a preferred offering as well, and you just admitted that these businesses you acquire have some issues getting them up to spec—
Yeah.
—to be in a publicly traded company. What can you reassure us that you're not going to dilute the company further and further and further as it becomes capitally intensive?
I think that's a very good question, and the answer is, I don't believe. We're going to tap the ELOC very cautiously and conservatively. That's why I think the cost of capital is far better to go with the private offering, and that's why I think the preferred structure is so much better. We can raise money faster that way and at a far less dilutive rate. Our goal is get the market cap up and then consider an IPO maybe at the end of the second quarter next year when the market cap is 3x, 4x, 5 x what it is today, which I firmly believe it will be. Then we'll sell a piece of the company for a much lower amount.
Are you talking about a spinoff, sorry, for an IPO?
Yeah. I'm sorry. The question is, are we talking about a spinoff? No, we—
You said IPO. IPO in relation to what?
Our company went public through a direct public offering. We have not done a public offering selling any shares of the company from Treasury. We just created a platform for existing shareholders to trade the shares independently. Correct. We had 475, 450, I'm sorry, investors on May 6th. Today we have about 3,000, maybe a little bit more than 3,000 investors. But we have not done a public offering yet, an initial public offering. We haven't done a roadshow. We haven't engaged a bank.
How did you go public? Correct.
Through a direct public offering.
Direct public offering?
Yes.
Direct listing. Direct listing.
Yes. The question was, how do we go public? The answer is, we went public through a direct listing on Nasdaq.
You did an S-1?
Yes. Okay, any other good questions? Yes, sir.
Just to go, hopefully just a little ball. What about potential synergies between the companies that you have right now?
Great question. Yes, so the question is, what about potential synergies? We bought the companies expecting that we were going to do what's called a build-up, not a roll-up. A build-up means every company remains in its own silo. It can grow within its industry. Maybe it does some acquisitions internally. But the expectation was not that they would be merged with any other portfolio company. Now, what we've found to be serendipitously valuable is that we are finding all sorts of horizontal opportunities within the companies. For example, I mentioned DAG as a cryptocurrency where we can stabilize value. DAG comes from one of our companies called Constellation Network, and yet it's being used by MediGuide. When we bought the companies, that wasn't anticipated. That's just found money. But it's a good question.
Okay, I'm going to finish incredibly, remarkably, precisely on time because the number just went to zero. Thank you. Thank you every—