Regarding earnings and advance commission concerns that you raised, here is a post I just saw on FOOL.COM. Feel free to comment:
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boards.fool.com
As many note in this thread, it seems the numbers of PPL reqire a bit deeper look to project future benefit, due to the advance commission issues. I hold a perspective as both an investor and associate with the company and offer the following thoughts just FYI.
Commissions are advanced 3 years on any new membership sale. But, as noted in another post, it is an advance against future monthly payments by that member. If they leave before 3 years, the sales associate owes money back to the corporation. PPL is generous with this and only require the associate reimburse 50% of the remaining balance. Of course, both the associate and the company are banking on new members remaining members, which is the key to the long range profits. PPL has had excellent history with keeping members. Renewal rates are about 78% for first year and 95% for people keeping the plan more than one year. That says to me - satisfied life long customers and referrals to new customers.
PPL has had 26 quarters of record earnings and new memberships. That leads to the paradox in the numbers. Paying commission up front means more members = more advances. And more initial $'s going out than $'s coming in on each of those new members. But, if after 3 years 78% of those customenrs are still sending in their $25 each month and now the commissions are only being paid as earned, the long term prospects look quite sunny.
I think those of us investing in PPL also need to keep in mind this is essentially a "new" company in growth (albeit with the benefits of an old company in management, debt, and market position) and we're going to see this dynamic of advanced commissions related to earnings for some years. The annual percentage growth recently in members and associates is quite astounding, but still only a tiny percentage of the public has been exposed to the product. Personally, I expect the retention rates to drop a bit over the next few years as new associates "jump on the bandwagon" because of the numbers and make sales, but don't do quality follow through. But even so, the total number of memberships being retained past 3 years will continue to grow. So, I see PPL as a buy and hold.
One other comment. From my personal involvement on the sales end I continue to be very impressed by the integrity of this company and it's management. From the quality of service they provide the customers to the attitude and actions toward their sales force. Combined with their 20+ year head start on competitors in this field, I believe they will be the company to beat for years to come. The only unknown is whether the public will want the product in large numbers. Obviously, I believe the answer is going to be "Yes".
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