Will more companies be shutting down in the next 12-24 months?

andyjr77
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9/24/2024 9:02am
jonkranked wrote:

regarding the finances now vs spring - they might want to get the sales on the books for '24 instead of carrying it over another year.

Sure. That's in part what I'm saying. Its a bit intertwined to this whole thread, but time value of money is basically everything in finance (for...

Sure. That's in part what I'm saying. Its a bit intertwined to this whole thread, but time value of money is basically everything in finance (for better, and for worse). If you are unfamiliar, effectively how time value of money works is it weights near term cashflows more heavily than cashflows further in the future. The rationale is a dollar today is more valuable than a dollar tomorrow. The problem with time value of money (or discounting of cash flows) is it puts so much onus on the short term it sometimes prohibits longer term thinking. 

Now, there may be tax advantages to booking revenue now vs the future depending on the company, but basically everything I do is on a pretax basis so I'm the wrong guy to comment on that side of things Wink

Shameless plug - more on time value money/DCF/NPV here https://jeffbrines.com/2024/01/07/net-present-value-is-ruining-real-est…

The other thing of course is what revenue/profit targets have investors (whether institutional or otherwise) imposed, and what are the incentives for achievement or penalties for missing them. I've been in a few PE/VC backed enterprises over the years where that's a play, and sometimes even midpoint in the year, we'd have to go on a forward booking frenzy (almost no matter how harmful to longer term opportunities!) to tick that arbitrary box.

You then end up with "consumer conditioning" as you mentioned earlier, and brand/product perception of value declining, so MSRP becomes a distant mythical creature, not the norm. 

 

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jeff.brines
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9/25/2024 6:55am Edited Date/Time 9/25/2024 6:56am
andyjr77 wrote:
The other thing of course is what revenue/profit targets have investors (whether institutional or otherwise) imposed, and what are the incentives for achievement or penalties for...

The other thing of course is what revenue/profit targets have investors (whether institutional or otherwise) imposed, and what are the incentives for achievement or penalties for missing them. I've been in a few PE/VC backed enterprises over the years where that's a play, and sometimes even midpoint in the year, we'd have to go on a forward booking frenzy (almost no matter how harmful to longer term opportunities!) to tick that arbitrary box.

You then end up with "consumer conditioning" as you mentioned earlier, and brand/product perception of value declining, so MSRP becomes a distant mythical creature, not the norm. 

 

Fair point. This goes to illustrated one of the big problems when you have private equity involved - short time horizons type of strategy can often trump long term sustainability. 

Any investor really concerned about long term value creation wouldn't care about any one particular quarter as much as they'd care about the overall health of the company and the company's ability to drive durable profits well into the future. Many private equity firms are more interested in telling a growth story and selling the company (which they have to do within their investment time horizon) at an "attractive multiple" - which can include some "lipstick on the pig" type behavior, which is what you are describing. 

If I was on the other side of the table and a PE firm was trying to sell me a bike company that had demonstrated top/bottom line growth BUT their margins were going down, I'd be asking a lot of questions. Margins are an easy signal to parse and often tells a story as to what is really happening within a company, what the market dynamics actually look like and how big of a moat they really have. If margins (especially gross margins) come down substantially as they sell more product, I'm sincerely questioning the size and durability of the company's moat. As a result, the multiple I assign to the company will also come down. There are exceptions, but this is a general rule. 
 

Fun fact, Wall St goes out of its way to try and parse the non-core, non repeatable events from a company's quarterly earnings. I'm not saying bargain basement blowouts would count as an "ex items" type of thing, but the big point I'm trying to make is as short term and greedy as Wall St may be, they generally are more interested in what the company can do into the future not just for "this quarter" or "that quarter". After all, the value of the asset is based on all future cashflows and discounting them back to today...Changing timing by a hair doesn't impact really anything.
 

3
9/25/2024 8:56am

Escape Collective reporting that The Pro's Closet appears to be up shit creek without a paddle:

"TPC has paused acquisition of any new bikes and also stopped booking service appointments at its shop. The company reportedly went through a deep round of layoffs late last week, with remaining staff told the business could close as soon as October 2.

Two former employees told Escape Collective that The Pro’s Closet is in dire financial shape and at imminent risk of going out of business."

https://escapecollective.com/the-pros-closet-may-be-in-deep-trouble/

My personal opinion is that TPC tried to grow way beyond their original niche and it turned out to be a bad business plan. Sucks for the employees but one of the more predictable failures, IMHO. Trying to be too many things at once instead of doing one thing well.

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tuxon
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9/25/2024 10:57am
Escape Collective reporting that The Pro's Closet appears to be up shit creek without a paddle:"TPC has paused acquisition of any new bikes and also stopped...

Escape Collective reporting that The Pro's Closet appears to be up shit creek without a paddle:

"TPC has paused acquisition of any new bikes and also stopped booking service appointments at its shop. The company reportedly went through a deep round of layoffs late last week, with remaining staff told the business could close as soon as October 2.

Two former employees told Escape Collective that The Pro’s Closet is in dire financial shape and at imminent risk of going out of business."

https://escapecollective.com/the-pros-closet-may-be-in-deep-trouble/

My personal opinion is that TPC tried to grow way beyond their original niche and it turned out to be a bad business plan. Sucks for the employees but one of the more predictable failures, IMHO. Trying to be too many things at once instead of doing one thing well.

Some great deals over there right now.  Just got a pretty mint used bike for 1/4 of retail.  They'll even knock some cash off if you message them. 

TEAMROBOT
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9/25/2024 11:11am
Sure. That's in part what I'm saying. Its a bit intertwined to this whole thread, but time value of money is basically everything in finance (for...

Sure. That's in part what I'm saying. Its a bit intertwined to this whole thread, but time value of money is basically everything in finance (for better, and for worse). If you are unfamiliar, effectively how time value of money works is it weights near term cashflows more heavily than cashflows further in the future. The rationale is a dollar today is more valuable than a dollar tomorrow. The problem with time value of money (or discounting of cash flows) is it puts so much onus on the short term it sometimes prohibits longer term thinking. 

Now, there may be tax advantages to booking revenue now vs the future depending on the company, but basically everything I do is on a pretax basis so I'm the wrong guy to comment on that side of things Wink

Shameless plug - more on time value money/DCF/NPV here https://jeffbrines.com/2024/01/07/net-present-value-is-ruining-real-est…

Hey Jeff, enjoyed your thoughts on short-term thinking and the time value of money. Left comments on your post and subscribed to comments if you want to banter about asset valuation on your site. 

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Simcik
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9/26/2024 8:45am

The Pro’s Closet Announces Closure After 18 Incredible Years

Louisville, CO – 9/26/24 – After 18 remarkable years of serving the cycling community, The Pro’s Closet (TPC) will close its doors in October. Since our founding, we’ve had the privilege of helping over 160,000 customers find their perfect ride and have sold more than 46,000 bikes. It’s been a hell of a ride, and we couldn’t be more thankful to the customers, employees, and vendors who made this journey possible.

"This has been an extraordinary chapter in the world of cycling, and we’re incredibly grateful to everyone who has been a part of it," said Jonathan Czaja, CEO of The Pro’s Closet. "From our dedicated team to the loyal riders and industry partners, your support allowed us to grow and create a lasting impact. While this is the end of the road for TPC, as it operates today, we are proud of what we’ve accomplished together."

The Pro’s Closet began with a vision to make cycling more accessible by offering a better way to buy and sell used bikes while becoming the first true “certified pre-owned” bike offering in the cycling industry. Over the years, we’ve remained committed to providing exceptional service and spreading the joy of cycling. As we close this chapter, we reflect on the community we’ve built and the countless miles our customers have ridden.

Because at the end of the day, Bikes make it better—and we still believe, Bikes are meant to be used.

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Simcik
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9/26/2024 8:46am

Excerpt from a Bike EU article:

HARD, Austria - Business has not always gone smoothly at Austria's second largest bicycle manufacturer, Simplon Fahrrad GmbH. How big these problems were, became public when the shareholders replaced the management at the end of 2023. This year's industry-wide double-digit sales drop left a real skid mark on Simplon's revenue, forcing them to apply for a Chapter 11 status this week to support the ongoing restructuring process.

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bizutch
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9/26/2024 9:55am

No Park Tool T-handle wrenches at 75% off in that Pros Closet sell off. Dookie!

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LePigPen
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9/26/2024 10:14am

They bought EVERYTHING they were offered post-covid and had no one to sell it to the past 2 years, didn't they?

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les962
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9/26/2024 2:40pm

I picked up a bike there 2 months ago and was shocked how big the place was, not quite Amazon big but way bigger than I expected. I asked if they had a bike park in the back .🤪. The 2 working there just kind of shrugged and had the "record store attitude" or "trouble" on the horizon . Guess it was the trouble look. Sad to see them go.

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jeff.brines
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10/8/2024 12:42pm Edited Date/Time 10/8/2024 6:54pm
Paging Jeff BrinesVista Outdoor agrees to sell Revelyst to investment group for $1.125B"....the Revelyst unit, which includes Bell, Giro, Fox Racing, CamelBak, Blackburn, QuietKat...

Paging Jeff Brines

Vista Outdoor agrees to sell Revelyst to investment group for $1.125B

"....the Revelyst unit, which includes Bell, Giro, Fox Racing, CamelBak, Blackburn, QuietKat and other brands."

Thx Noah. 

Can't believe I missed this one. Shows how closely I'm following "the markets" right now. Noah basically caught the closing act to a much longer story, which in essence can be summarized in saying Vista is going private in a two part transaction totaling $3.4B including debt. Due to Vista's holdings, which includes firearm related companies, they basically split the company into two parts to receive the maximum amount in the deal (Noah caught the "bike adjacent" transaction). On that note, this probably isn't a surprise to anyone, but there are certain private equity funds/investment groups that basically stipulate in theirbylaws they are not allowed to invest in a company that has business in the firearms industry. Hence, Vista had to split the entity into two parts (which was already done internally) to get the deal done. The board has approved the deal but shareholders still need to vote. 

EDIT: There are some takeaways I can pull from this but I realized if I really want to do a good job of this I'd want to include Fox Factory and maybe even Shimano in the analyisis. Stand by. I may actually do this. 

In any event - here are some follow up links: 

The Reuters story from Friday https://www.reuters.com/markets/deals/vista-outdoor-strikes-deal-sell-itself-two-parts-34-billion-2024-10-05/

The company's latest earnings presentation. I feel a lot of you will appreciate this. https://s29.q4cdn.com/177147254/files/doc_financials/2025/q1/Q1-FY25-We…

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boozed
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10/8/2024 6:34pm Edited Date/Time 10/8/2024 6:43pm
iceman2058 wrote:
This post just popped up on Nukeproof's IG, in all likelihood it just means CRC is selling off remaining stock, FWIW (that's where the link in...

This post just popped up on Nukeproof's IG, in all likelihood it just means CRC is selling off remaining stock, FWIW (that's where the link in their bio points to):

A bunch of Nukeproof and Vitus parts and hardware are being sold on eBay by a bike shop in England named "Ascend Components", while the shop's Facebook page also advertises frames.

They also have a seatpost that looks like a relabelled Brand-X Ascend XL, so perhaps they were or have connections to one of WiggleCRC's former suppliers. The parts I was after were out of stock at CRC when it went down, while the frames they listed don't have shocks.

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Verbl Kint
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10/11/2024 2:26am

Slightly off-topic, but Brembo just bought Ohlins:

https://www.reuters.com/markets/deals/brembo-buys-suspension-maker-ohlins-racing-405-million-2024-10-11/

"The group has 500 employees across two production facilities, in Sweden and Thailand, two R&D centres and four distribution and testing branches in the U.S., Germany, Thailand and Sweden, Brembo said.

"As we join forces with Brembo, we are excited to unlock new growth opportunities and leverage our respective strengths and assets to drive innovation and deliver even greater value to our customers and employees,” said Tom Wittenschlaeger, CEO of Ohlins Racing."
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gibbon
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10/11/2024 5:40am

$400 million for Ohlins does'nt seem like a lot when you consider that Rad Power is valued at £1.4 billion.

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jonkranked
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10/11/2024 5:58am
Verbl Kint wrote:
Slightly off-topic, but Brembo just bought Ohlins:https://www.reuters.com/markets/deals/brembo-buys-suspension-maker-ohlins-racing-405-million-2024-10-11/"The group has 500 employees across two production facilities, in Sweden and Thailand, two R&D centres and...

Slightly off-topic, but Brembo just bought Ohlins:

https://www.reuters.com/markets/deals/brembo-buys-suspension-maker-ohlins-racing-405-million-2024-10-11/

"The group has 500 employees across two production facilities, in Sweden and Thailand, two R&D centres and four distribution and testing branches in the U.S., Germany, Thailand and Sweden, Brembo said.

"As we join forces with Brembo, we are excited to unlock new growth opportunities and leverage our respective strengths and assets to drive innovation and deliver even greater value to our customers and employees,” said Tom Wittenschlaeger, CEO of Ohlins Racing."

is the Tenneco referenced in the article the same Tenneco that used to own Marzocchi?

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dolface
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10/11/2024 6:23am
Verbl Kint wrote:
Slightly off-topic, but Brembo just bought Ohlins:https://www.reuters.com/markets/deals/brembo-buys-suspension-maker-ohlins-racing-405-million-2024-10-11/"The group has 500 employees across two production facilities, in Sweden and Thailand, two R&D centres and...

Slightly off-topic, but Brembo just bought Ohlins:

https://www.reuters.com/markets/deals/brembo-buys-suspension-maker-ohlins-racing-405-million-2024-10-11/

"The group has 500 employees across two production facilities, in Sweden and Thailand, two R&D centres and four distribution and testing branches in the U.S., Germany, Thailand and Sweden, Brembo said.

"As we join forces with Brembo, we are excited to unlock new growth opportunities and leverage our respective strengths and assets to drive innovation and deliver even greater value to our customers and employees,” said Tom Wittenschlaeger, CEO of Ohlins Racing."

Gonna leverage the ever-loving crap outta those synergies...

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Simcik
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10/11/2024 7:41am
jonkranked wrote:

is the Tenneco referenced in the article the same Tenneco that used to own Marzocchi?

One in the same.

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TEAMROBOT
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10/11/2024 11:10am
gibbon wrote:

$400 million for Ohlins does'nt seem like a lot when you consider that Rad Power is valued at £1.4 billion.

*Rad Power is way, way, way over valued at £1.4 billion

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NoahColorado
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10/11/2024 1:38pm
dolface wrote:

Gonna leverage the ever-loving crap outta those synergies...

They should synergize the name: BrembÖhlins

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SteveClimber
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10/11/2024 1:45pm
gibbon wrote:

$400 million for Ohlins does'nt seem like a lot when you consider that Rad Power is valued at £1.4 billion.

TEAMROBOT wrote:

*Rad Power is way, way, way over valued at £1.4 billion

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it at that price (me neither too).

It's got all the buzz words, commuting electric sustainable bike for marketing rounds. Not really a surprise they could hit such a valuation from funding rounds. 

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dolface
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10/11/2024 1:53pm
dolface wrote:

Gonna leverage the ever-loving crap outta those synergies...

They should synergize the name: BrembÖhlins

Best-in-class thought leadership right there!

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jeff.brines
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10/14/2024 9:11am Edited Date/Time 10/14/2024 9:30am
gibbon wrote:

$400 million for Ohlins does'nt seem like a lot when you consider that Rad Power is valued at £1.4 billion.

TEAMROBOT wrote:

*Rad Power is way, way, way over valued at £1.4 billion

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it...

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it at that price (me neither too).

It's got all the buzz words, commuting electric sustainable bike for marketing rounds. Not really a surprise they could hit such a valuation from funding rounds. 

Its like my Patagonia vest channels me to the board when there is stuff like this for me to write about Wink  
 

Per the usual, this post got a little long. In it, I unpack the valuation of Rad Power Bikes relative to broader economic movements and loosely tie it into the Brembo/Ohlins deal. If this isn't interesting to you, skip this!


RE; Rad Power Bikes valuation - We know how much money Rad Power has raised but we don't know how much equity they have sold hence we really don't know what the valuation is (at least as far as I can find). Linqto is the only place I see a $1.4B number (not £1.4B ) but they are hardly a definitive source of financial intelligence. They are likely guessing the company sold a total of ~20-25% so the math is $329 ÷ ~20-25% = $1.4B

Regardless, what we do know is the company has raised a total of $329M with their most recent round, their Series D, raising $154M. What is illustrative about this is they did their Series D in October of 2021. Now go look at the chart below. What this shows you is they raised right before rates started going up. Rising rates proved to be the death blow to venture capital and growth valuations. As a refresher, when rates are effectively zero the market is willing to pay significantly more, and take significantly more risk, for a given return. Hence, Rad Power raising all this money and being valued so favorably. 

Rates go up, what happens? The market is no longer willing to take this kind of risk (because it doesn't have to) and the multiple ascribed to a company like Rad Power plummets. Big point, if Rad Power were to go sell equity in 2024, its highly unlikely to be nearly as expensive as it was in 2021 (unless the company's business has gone bananas, which we can safely assume from this thread it hasn't). A copmany raising at a lower valuation is what is known as a "down round", and it can be very difficult for a company to dig itself out of this situation when it comes to next steps in the equity markets. When this happens, a company usually needs to right the ship fast and operate sustainably (no longer operate at a loss) or they'll implode. 

Ironically, here is the latest story I can find on them - looks like they are heeding the advice in this thread Wink - https://www.geekwire.com/2024/more-layoffs-at-rad-power-bikes-as-seattle-e-bike-maker-aims-to-ensure-brands-longevity/ as they are doing what they need to operate as a sustainable business, not a "fast growing tech company". 

What I really want this to illustrate to those following this thread is what happens when interest rates are on the floor and there is excessive amounts of capital deployed into an economy (COVID stimulus stuff). While either one of those things can create wonky economic side effects, in tandem it can really distort all sorts of things, where the fun-house style mirror effect pushes people well past the point of common sense and the madness of crowds takes over. 

As to the Brembo/Ohilins deal, I'd love to see their financials over the last few years so we could understand what the market is paying. My guess is Fox was a great benchmark, being its public, and there was a healthy premium paid by Brembo to get the deal done - unless there were balance sheet troubles, which I doubt considering the type of buyer. 

Wild times in the outdoor industry. Question for everyone following along, do you all see M&A potentially coming back as a good thing or a bad thing?



image 64.png?VersionId=1XiwjyAXJ3GD1ajblywiFWHPK

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j0lsrud
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10/14/2024 9:47am
TEAMROBOT wrote:

*Rad Power is way, way, way over valued at £1.4 billion

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it...

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it at that price (me neither too).

It's got all the buzz words, commuting electric sustainable bike for marketing rounds. Not really a surprise they could hit such a valuation from funding rounds. 

Its like my Patagonia vest channels me to the board when there is stuff like this for me to write about ;)  Per the usual, this...

Its like my Patagonia vest channels me to the board when there is stuff like this for me to write about Wink  
 

Per the usual, this post got a little long. In it, I unpack the valuation of Rad Power Bikes relative to broader economic movements and loosely tie it into the Brembo/Ohlins deal. If this isn't interesting to you, skip this!


RE; Rad Power Bikes valuation - We know how much money Rad Power has raised but we don't know how much equity they have sold hence we really don't know what the valuation is (at least as far as I can find). Linqto is the only place I see a $1.4B number (not £1.4B ) but they are hardly a definitive source of financial intelligence. They are likely guessing the company sold a total of ~20-25% so the math is $329 ÷ ~20-25% = $1.4B

Regardless, what we do know is the company has raised a total of $329M with their most recent round, their Series D, raising $154M. What is illustrative about this is they did their Series D in October of 2021. Now go look at the chart below. What this shows you is they raised right before rates started going up. Rising rates proved to be the death blow to venture capital and growth valuations. As a refresher, when rates are effectively zero the market is willing to pay significantly more, and take significantly more risk, for a given return. Hence, Rad Power raising all this money and being valued so favorably. 

Rates go up, what happens? The market is no longer willing to take this kind of risk (because it doesn't have to) and the multiple ascribed to a company like Rad Power plummets. Big point, if Rad Power were to go sell equity in 2024, its highly unlikely to be nearly as expensive as it was in 2021 (unless the company's business has gone bananas, which we can safely assume from this thread it hasn't). A copmany raising at a lower valuation is what is known as a "down round", and it can be very difficult for a company to dig itself out of this situation when it comes to next steps in the equity markets. When this happens, a company usually needs to right the ship fast and operate sustainably (no longer operate at a loss) or they'll implode. 

Ironically, here is the latest story I can find on them - looks like they are heeding the advice in this thread Wink - https://www.geekwire.com/2024/more-layoffs-at-rad-power-bikes-as-seattle-e-bike-maker-aims-to-ensure-brands-longevity/ as they are doing what they need to operate as a sustainable business, not a "fast growing tech company". 

What I really want this to illustrate to those following this thread is what happens when interest rates are on the floor and there is excessive amounts of capital deployed into an economy (COVID stimulus stuff). While either one of those things can create wonky economic side effects, in tandem it can really distort all sorts of things, where the fun-house style mirror effect pushes people well past the point of common sense and the madness of crowds takes over. 

As to the Brembo/Ohilins deal, I'd love to see their financials over the last few years so we could understand what the market is paying. My guess is Fox was a great benchmark, being its public, and there was a healthy premium paid by Brembo to get the deal done - unless there were balance sheet troubles, which I doubt considering the type of buyer. 

Wild times in the outdoor industry. Question for everyone following along, do you all see M&A potentially coming back as a good thing or a bad thing?



image 64.png?VersionId=1XiwjyAXJ3GD1ajblywiFWHPK

https://proff.se/foretag/%C3%B6hlins-racing-aktiebolag/upplands-v%C3%A4sby/bilar/2JYR4WMI5YCZW

Here you can see the Öhlins financial statements from the later years. Its swedish language, and with swedish money /SEK, but most of the info should be interesting for you in this case.

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SteveClimber
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10/14/2024 11:21am
TEAMROBOT wrote:

*Rad Power is way, way, way over valued at £1.4 billion

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it...

Private company. They did raise a lot of capital at a high valuation, so you can't say it's overvalued. Just that you wouldn't pay for it at that price (me neither too).

It's got all the buzz words, commuting electric sustainable bike for marketing rounds. Not really a surprise they could hit such a valuation from funding rounds. 

Its like my Patagonia vest channels me to the board when there is stuff like this for me to write about ;)  Per the usual, this...

Its like my Patagonia vest channels me to the board when there is stuff like this for me to write about Wink  
 

Per the usual, this post got a little long. In it, I unpack the valuation of Rad Power Bikes relative to broader economic movements and loosely tie it into the Brembo/Ohlins deal. If this isn't interesting to you, skip this!


RE; Rad Power Bikes valuation - We know how much money Rad Power has raised but we don't know how much equity they have sold hence we really don't know what the valuation is (at least as far as I can find). Linqto is the only place I see a $1.4B number (not £1.4B ) but they are hardly a definitive source of financial intelligence. They are likely guessing the company sold a total of ~20-25% so the math is $329 ÷ ~20-25% = $1.4B

Regardless, what we do know is the company has raised a total of $329M with their most recent round, their Series D, raising $154M. What is illustrative about this is they did their Series D in October of 2021. Now go look at the chart below. What this shows you is they raised right before rates started going up. Rising rates proved to be the death blow to venture capital and growth valuations. As a refresher, when rates are effectively zero the market is willing to pay significantly more, and take significantly more risk, for a given return. Hence, Rad Power raising all this money and being valued so favorably. 

Rates go up, what happens? The market is no longer willing to take this kind of risk (because it doesn't have to) and the multiple ascribed to a company like Rad Power plummets. Big point, if Rad Power were to go sell equity in 2024, its highly unlikely to be nearly as expensive as it was in 2021 (unless the company's business has gone bananas, which we can safely assume from this thread it hasn't). A copmany raising at a lower valuation is what is known as a "down round", and it can be very difficult for a company to dig itself out of this situation when it comes to next steps in the equity markets. When this happens, a company usually needs to right the ship fast and operate sustainably (no longer operate at a loss) or they'll implode. 

Ironically, here is the latest story I can find on them - looks like they are heeding the advice in this thread Wink - https://www.geekwire.com/2024/more-layoffs-at-rad-power-bikes-as-seattle-e-bike-maker-aims-to-ensure-brands-longevity/ as they are doing what they need to operate as a sustainable business, not a "fast growing tech company". 

What I really want this to illustrate to those following this thread is what happens when interest rates are on the floor and there is excessive amounts of capital deployed into an economy (COVID stimulus stuff). While either one of those things can create wonky economic side effects, in tandem it can really distort all sorts of things, where the fun-house style mirror effect pushes people well past the point of common sense and the madness of crowds takes over. 

As to the Brembo/Ohilins deal, I'd love to see their financials over the last few years so we could understand what the market is paying. My guess is Fox was a great benchmark, being its public, and there was a healthy premium paid by Brembo to get the deal done - unless there were balance sheet troubles, which I doubt considering the type of buyer. 

Wild times in the outdoor industry. Question for everyone following along, do you all see M&A potentially coming back as a good thing or a bad thing?



image 64.png?VersionId=1XiwjyAXJ3GD1ajblywiFWHPK

I think the M&A is good overall.

 

There are too many large bike manufacturers and not enough small manufacturers (imo). The consolidating of the large manufacturers should alloy more efficient investment and improvement in technology and materials construction, which is really where MTB is heading. 

Geometry is cheap to engineer, scaling 3D printed yokes, new carbon technology etc isn't, and requires big players with big investment. 

Having said that, the growth in boutique offerings is the necessary part to offset this, and we've seen the trickle down in materials tech benefit this micro brands. I.e frameworks design, Privateer, Airdrop etc etc. As providing viable niche alternatives is essential so all bikes don't end up a) expensive and b) a session. 

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jeff.brines
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10/23/2024 5:55am Edited Date/Time 10/23/2024 6:40am

KTM's umbrella company cancelled their 2024 guidance citing "market development in the second half of the year below expectations" due to "difficult macroeconomic conditions (that) are lasting longer than expected".

I can tell you from an analyst perspective, anytime a company pulls guidance its bad.

While this is just one data point, and the demographic crossover is most certainly not 1:1, this would suggest we are not out of the woods just yet and companies will likely continue to struggle. Worth noting, KTM does have a bicycle unit which is primarily e-bike (and if I'm honest, they could certainly use someone from the Vital audience to improve their offerings). Pretty sure they also own Felt. 

EDIT: KTM legitimately might be in trouble. Also, I would not be surprised to hear Felt is being shopped around at a significant discount. They need cash and they need to focus on core operating activities. Oh, and their CFO should be fired. 

Here is the press release

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Guidance 2024 canceled

Market development in the second half of the year below expectations


The difficult macroeconomic conditions are lasting longer than expected. The European economy is stagnating, with the important German market in particular in recession. In the USA, consumer purchasing power remains low due to the high cost of living and the long period of expensive consumer credit.

 

Motorcycle segment: US market as a whole declining, Europe losing momentum

Bicycle segment: restructuring is in full swing, destocking continues
 


As a result of these circumstances, PIERER Mobility will fall short of expectations in terms of revenue and earnings, as well as with regard to the reduction in working capital and net debt in the current financial year, and is revoking its guidance for the 2024 financial year. A new review of non-cash value adjustments will also be carried out by the end of the year.

 

Guidance 2024 canceled - The ad hoc announcement was published on 21 October, 2024.

The adjustment of the guidance for the 2024 financial year were published on June 14, 2024 (Ad hoc). For more information, see the press release, June 14, 2024.

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