$IPW iPower runs and operates zenhydro.com, an online eCommerce store for Hydroponics equipment and other indoor farming and Agricultural products. They sell their products via $AMZN Amazon, $WM WalMart, $EBAY eBay and other online distribution channels.

$IPW is going to list on NASDAQ on May 6th 2021. They are looking to raise about $50M, pricing 5M shares at about $10 (mid point of range $9-$11). The issue is being managed by D. A. Davidson.

$IPW – At that price they will be valued at about $220M, giving them a EV/Revenue multiple of 5.25 and EV/EBIDTA of 53 for a company growing at 75% YoY.

iPower sells 26K 3rd party products (via partnerships with 100 suppliers) and its own private label products to indoor farming enthusiasts and professional growers (marijuana, microgreens, etc.)

The company grew revenues 75% in 2020 to $40M with net income of $2M. Revenue in 2019 was $26M and net income was $1M.

The company has its own fulfilment center in California and has been very capital efficient, raising less than $3.5M to date.

$IPW iPower was founded in 2010 by CEO Chenlong (Lawrence) Tan, but only recently (2018) changed its name and legal entity to iPower.

In 2020 $IPW product sales mix includes: Nutrients such as fertilizers, (17%), Ventilation systems (16%), Grow light systems (9%), Air filter devices (8%) and Trimmers (4%) among other products.

They also sell their own private label brands iPower and Deluxe for ventilation and lighting.

What is Hydroponics?

Hydroponics is a method of gardening in which plants are grown in a controlled environment with lighting sources and an optimized mix of nutrients and water, instead of soil.

Roots of the plants are submerged in water giving them direct access to nutrients resulting in efficient growth.

Since hydroponics can be grown indoors, plants are protected from weather, pests and chemicals.

How large is the Hydroponics market?

Hydroponics is largely used to grow micro greens, cannabis & other vegetables. The global hydroponics market is about $9.5B in 2020, growing at 5% CAGR to $18B by 2026.

The growth is driven by indoor growing of year-round hothouse vegetables in small batches, as well at large growth in cannabis.

How well has iPower executed?

$IPW iPower has executed its growth very well, with strong top line revenue growth of 75% during Covid, gross margins of 38%-41% and net income of $1+M.

$IPW Monthly revenue has grown from mostly 3rd party product sales (lower margin) to private-label products (higher margin).

How does $IPW distribute its products?

$IPW operates its own website (zenhydro.com) but also sells on $AMZN (Amazon.com) as a 3rd party seller, as well as listing on Walmart $WMT and eBay $EBAY.

In 2020 $AMZN business grew 87% YoY, with 62 listed products on the Amazon marketplace and 5 best selling SKU.

The manage their own logistics and fulfillment center near Los Angeles, California from where they ship and distribute products.

Why are they growing so quickly?

Covid growth in eCommerce is pushing their short term growth trends. There are 2 customer segments – small residential gardens and small commercial cultivators – who focus on Vertical farming.

They have a good mix of products and growth has been driven by Cannabis sales due to Covid in 2020.

Who are the competitors?

Over 200 hydroponics equipment makers and distributors exist in the US alone, with the large ones being Aerofarms, Freight Farms and LumiGrow.

What are the risks and concerns?

There are 5 major concerns I have:

1. 2020 growth was driven by Covid and movement from offline purchases to online. Will that be sustained?
2. Of the 170 reviews for the store, their rating is 1.7 / 5, which is very low. Most of the reviews are about poor customer service and delayed product shipments. However their $AMZN store reviews are terrific, so I am not sure why they seem to have issues with direct fulfillment.
3. There is one employee lawsuit pending in LA court which is still ongoing but not disclosed in the SEC filing.
4. The company’s sole founder has majority of the Class A stock which have 10:1 voting rights representing 96.53% of voting power.
5. 75% of sales are via 3rd party platforms such as $AMZN and $WMT. If this slows or if the platforms cause issues, revenue is going to drop quickly.

What is the recommendation?

$IPW As with all IPO I would watch $IPW for 3-6 months before I take a serious position. The superficial numbers and growth look good and I like the valuation, but Covid growth concerns and poor customer reviews give me pause.

References

•https://www.bloomberg.com/profile/person/20499356 •https://www.retailroadshow.com/presentation/#/pres?presid=894692 •https://www.sec.gov/Archives/edgar/data/1830072/000168316821000335/ipower_s1.htm •https://trellis.law/ruling/19STCV29272/WENJUAN-LUO-VS-CHENLONG-TAN/20200826edb627

•https://unicourt.com/case/ca-la23-wenjuan-luo-vs-chenlong-tan-428438

Here are some memorable quotes from the book “The Heart of Buddha’s Teaching” by Thich Nhat Nahn

The book is terrific and I highly recommend it. I am on a goal to read one book a month on self improvement, philosophy and spirituality. If this summary is helpful, drop me a line on twitter.

When one tree in the garden is sick, you have to care for it. But don’t overlook all the healthy trees. Even while you have pain in your heart, you can enjoy the many wonders of life.

To me this is about being grateful and appreciating things even during the depths of despair. Don’t ignore your suffering, but don’t forget to enjoy the wonders of life, for your sake and for the benefit of many beings.

You cannot choose to be austere alone. You cannot choose to be indulgent alone. The middle way of moderation gives you the balance.

The four noble truths and eight fold path

The First Noble Truth is suffering (dukkha).

We all suffer to some extent. We have to recognize and acknowledge the presence of this suffering and touch it. To do so, we may need the help of a teacher and a Sangha, friends in the practice.

The Second Noble Truth is the origin, roots, nature, creation, or arising (samudaya) of suffering.

After we touch our suffering, we need to look deeply into it to see how it came to be.

The Third Noble Truth is the cessation (nirodha) of creating suffering by refraining from doing the things that make us suffer.

The Third Truth teaches us that healing is possible.

The Fourth Noble Truth is the path (marga) that leads to refraining from doing the things that cause us to suffer.

The 8 fold path

Right View,

Right Thinking,

Right Speech,

Right Action,

Right Livelihood,

Right Diligence,

Right Mindfulness, and

Right Concentration.

Habits to cultivate:

1. Stopping
2. Calming

We have to learn the art of stopping the suffering.

We can stop by practicing mindful breathing, mindful walking, mindful smiling, and deep looking in order to understand.

We have to learn the art of breathing in and out, stopping our activities, and calming our emotions.

To calm our body and mind we can adopt the 5 stages.

(1) Recognition — If we are angry, we say, “I know that anger is in me.”
(2) Acceptance — When we are angry, we do not deny it. We accept what is present.
(3) Embracing — We hold our anger in our two arms like a mother holding her crying baby. Our mindfulness embraces our emotion, and this alone can calm our anger and ourselves.
(4) Looking deeply — When we are calm enough, we can look deeply to understand what has brought this anger to be, what is causing it.
(5) Insight — The fruit of looking deeply is understanding the many causes and conditions primary and secondary that are causing it.

We have to learn the art of resting, allowing our body and mind to
rest. If we have wounds in our body or our mind, we have to rest so they can heal themselves.

Calming allows us to rest, and resting is a precondition for healing.

Meditation does not have to be hard labor. Just allow your body and mind to rest like an animal in the forest. Don’t struggle. There is no need to attain anything.

If we are mindful, we will know whether we are “ingesting” the toxins of fear, hatred, and violence, or eating foods that encourage understanding, compassion, and the determination to help others.

Practicing mindfulness helps us learn to appreciate the well-being that is already there. With mindfulness, we treasure our happiness and can make it last longer.

The greatest miracle is to be alive. We can put an end to our
suffering just by realizing that our suffering is not worth suffering for.

I will explore the 8 fold path in the next post.

$FB Facebook reported Q1 EPS of $3.30 (+95% YoY), $0.93 better than the analyst estimate of $2.37

$FB Revenue for the quarter came in at $26.17B (+47% YoY) versus the consensus estimate of $23.67B.

$FB daily active users (DAUs) – DAUs were 1.88B on average for March 2021, (+8% YoY).

$FB monthly active users (MAUs) – MAUs were 2.85B as of March 2021 (+10% YoY).

$FB Ad rates and pricing rose 30% YoY driving strong revenue gains, which led 4 analysts to raise price targets to $380 – $400.

$FB is investing in the consumer shopping experience – with ~9% of total MAUs now interacting with merchandise, which can drive universal adoption of Shops and subsequently increase the shopping use case.

$FB disclosed that there 1M active shopping stores, 250M visitors to
these stores.

$FB announced another $4B in share buybacks as well, likely raising EPS. $FB has $62B in cash with no debt.

A 12-month price target of $380 seems reasonable based on 24x 2022 GAAP EPS estimate plus cash, and implies ~16.0x ’22E Adjusted
EBITDA.

New intiatives

“We have a long way to go to build out a full featured commerce platform across our services, and this is a multiyear journey. But I am very committed to getting there” – Mark Zuckerberg

“We’re looking forward to offering businesses a native way to manage their customer relationships on our platforms” – Mark Zuckerberg

“We’re rebuilding meaningful elements of our ad tech so that our system continues to perform when we have access to less data in the future (Apple IDFA)” — Sheryl Sandberg

$HNST Honest company, founded by Jessica Alba is going public next week on May 5th, expecting to raise $105M in cash at $14-$17 / share valuing the company at $1.4B to $1.8B.

$HNST sells Baby, Skin Care, and Wellness products online and via retail outlets. It was founded in 2012.

The company is a digital native company with a mission to make natural products with a green and clean footprint for the socially conscious consumer.

$HNST develops products in its in-house lab, and is transparent around how its products are made and what ingredients are put inside them.

Market

“Clean and Natural” segment is ~$17B per year in annual spend, and is a rapidly growing segment within a large consumer market for Baby, Skin care, and Wellness products (~$130B per year). 80% of this market is offline retail store. Honest is an omnichannel company with D2C (Direct to Consumer) & 30K store distribution through retail.

$HNST: Multiple changes in management and some challenging years (2017-2018) forced the company to go from a monthly subscription model to a regular à la carte retail model with non-Baby products approaching 40% of sales in 2020.

55% of sales come from online (mobile, web) and remaining from retail.

The top three $HNST categories are Diapers and Wipes, Skin and Personal Care, and Household and Wellness, which represented 63%, 26%, and 11% of its 2020 revenue.

$HNST IPO pricing range of $14 to $17 per share implies a market cap ranging from ~$1.4bn to $1.7bn (101M fully diluted shares outstanding).

Pre-IPO investors include IVP, Fidelity, Lightspeed, General Catalyst, ICONIQ, and Dragoneer.

Financials

$HNST revenues increased 27.6% from ~$236M to ~$301M in 2020, with Gross Margins in the 35% range.

$HNST reported positive EBITDA of ~$11mn during 2020 at 4% operating margin.

Competition

$HNST faces competition vs. large retailers and well-established brands such as $AMZN (Amazon), $COST (Costco) and $PG (Procter and Gamble) Pampers and $KMB (Kimberly Clark) Huggies.

Valuation

$HNST could generate revenues ranging from $350M to $375M (2021) and $425M to $450M (2022), implying 17% YoY growth, with gross margin and EBITDA margin approaching ~39% and ~8%, respectively, in 2022.

$HNST valuation implies 3.0x to 3.5x on 22E revenues and 7.5x to 9.0x 22E Gross Profit.

Recommendation

I dont think this company will soar on IPO, but I may be wrong. I do think there is a segment of their consumers who love them and they might buy the stock, but I believe there are better opportunities in other places to generate better returns.

Alphabet (Google) $GOOG $GOOGL reported 1Q 2021 earnings yesterday. The results were significantly above both street estimates and guidance.

Alphabet $GOOG reported Q1 2021 EPS of $26.29, $10.41 better than the analyst estimate of $15.88. Revenue for the quarter came in at $55.31B versus the consensus estimate of $51.68B

$GOOG saw strong growth in YouTube, Cloud and accelerating search revenue. I believe this might be one of the best Covid recovery plays along with $FB.

Google Cloud and YouTube segment revenue growth stayed above 45% YoY.

$GOOG repurchased $7.9B worth of shares; repurchased ~$76bn worth of shares in the past 4 years; $GOOGL board authorized another $50B buyback.

Cloud: Revenue increased 46% YoY, and backlog increased to vs. ~$30B in 4Q vs. $19bn in 3Q.

Analyst Price Targets (PT) upgrades

PT Raised to $2,850 at Jefferies
PT Raised to $2,800 at Canaccord Genuity
PT Raised to $2,635 at Piper Sandler
PT Raised to $2,700 at Cowen
PT Raised to $2,575 at Morgan Stanley
PT Raised to $2,700 at Needham & Company
PT Raised to $2,750 at Raymond James

$ZIP ZipRecruiter is an online marketplace for jobs. ZipRecruiter works like a matchmaker curating job opportunity for job seekers, and candidates for employers.

$ZIP is planning to go IPO via direct listing sometime in Q2 2021.

Background

The company was founded in 2010 by Ian Siegel Joe Edmonds, Ward Poulos and Will Redd in Santa Monica, California. The company’s investors include venture capital firms IVP and Basepoint Ventures.

$ZIP has raised more than $250M in funding and was previously valued at $1.5B in 2019.

Market

Employers spend more than $205B per year in the United States alone to recruit talent.

Online recruitment alone represents over $13 billion of this opportunity.  The online segment of the U.S. recruiting market is expected to grow at a compound annual growth rate, or CAGR, of 14.1% from 2016 to 2025.

The online segment of the recruiting market in the U.S. is expected to continue expanding its share of the recruiting market, with online share increasing from 3% in 2016 to 6% in 2020 and to 8% in 2025.

Industry

ZipRecruiter has competition in LinkedIn, Indeed, as well as from many well-established online job sites such as CareerBuilder, Craigslist, Glassdoor, and Monster and may face additional competition from Google for Jobs or Facebook.

Product

Jobs posted with ZipRecruiter are distributed to well over 1,000 career sites.

When employers post a job, ZipRecruiter’s matching technology identifies and sends an alert to the best job seekers in $ZIP

$ZIP provides employers with access to 14M monthly Active Job Seekers.

Customers

Roughly about 2.8 M employers and 110M job seekers use $ZIP

$ZIP experiences a decline in the Paid Employers during the fourth quarter as a result of seasonal hiring dynamics.

The number of Quarterly Paid Employers December 31, 2019 declined by 9% as compared to the quarter ended September 30, 2019.

In 2020, $ZIP experienced a decrease in sequential revenue of 23% in the quarter ended June 30, 2020 as a result of the COVID-19 pandemic, but saw consecutive quarters of revenue growth of 17% and 11% in the third and fourth quarters of 2020 as employers started to return.

Revenue in the second half of the year represented 52% of total annual revenue in 2018, 2019 and 2020.

The average customer spends about $1200+ each year.

$ZIP provides a variety of pricing plans from flat rate pricing on terms ranging from a day to a year, as well as performance-based pricing for employers that run sophisticated recruitment marketing campaigns.

$ZIP subscription revenue consists of time-based job posting plans, upsells which complement or expand visibility and prominence to job posting plans, and resume database plans.

Go to Market

Customer payback period averaged less than 16 months, meaning that the Cohort’s Employer Acquisition Expense was, on average, recovered within 1.5 years.

$ZIP spends money on marketing campaigns and has an inside sales team.

Management

ZipRecruiter is run by a seasoned management team with average tenure of about 24 months at $ZIP

Financials

Last year, it had net income of $86M on revenue of $418M , compared with a net loss of $6.3M on revenue of $430M in 2019.

Revenue slowed because of Covid but they turned a profit.

The company was worth $1.5 billion in a 2018 fundraising round. ZipRecruiter is expected to list the IPO at between $3B and $5B in valuation.

The company hired Goldman Sachs Group Inc and JPMorgan Chase & Co to lead in the preparations for the IPO.

Valuation

At $3B – $5B in valuation, with expected 20% growth the company is valued at 7X to 12X 2020 revenues.

Recommendation

While this is an interesting company, I am going to wait for 6-9 months until after the IPO and 2 quarters of execution before I even take a position (or not).

$KNBE Knowbe4 (Know Before) is a Security Training and awareness SaaS company that went public last week.

$KNBE was founded in 2010 by Stu Sjouwerman in Tampa Florida and has famed hacker Kevin Mitnick on board as well.

$KNBE listed at $16/share, raising $201 Million at a valuation of $2.4B for the company, which recorded $174.8M in 2020 revenues growing at 45% YoY.

The company has over 37K customers paying over $4000 per year to provide security training services, which prevent attacks such as data breaches and speak phishing.

$KNBE has a 3 steps process to train users, simulate attacks and review results to ensure compliance. They also provide free tools to test users and network which help to identify the problems of social engineering, spear phishing and ransomware attacks.

$KNBE opened at $19.95 per share Thursday, above expectations, and peaked at $25.94 shortly before closing at $24.14. At the highest price, the company’s was worth nearly $4.3B

$KNBE saw revenues of $174.9M in 2020, up from $120.6M in 2019 and $71.3M in 2018. It did not, however, turn a profit in any of those years. Last year’s net loss was $2.4M a dramatically lower number than the $125M loss the year earlier.

$KNBE has 84%+ gross margins and will be on track to be EBITDA positive by 2021 end (estimated).

$KNBE has been mentioned as a leader in the Forrester wave for Security awareness and training solutions.

The market for Security awareness and training is about $1B annually, growing at 7% CAGR and is expected to be at $1.9B by 2025.

There are multiple players in the market, including KnowBe4,  Webroot,  Infosec IQ,  Inspired eLearning,  Proofpoint $PFPT, The Defence Works, SANS, Symantec, and Ataata.

$KNBE has received at least $158M from investors including Elephant Partners, KKR, Goldman Sachs, Tiger Global, Vista Equity Partners and Kevin Mitnick.

$KNBE has a direct sales force as well as channel partners (drive 37% of revenues) and managed service providers.

Metrics: Average revenue per customer is about $4700 (+17% YoY), while rule of 40 is at 44. DBNER and CAC were not provided in the SEC filings, so it is hard to compare $KNBE to other providers in SaaS.

Valuation: At 22X 2020 revenues and 15X 2021 revenues, $KNBE is richly valued, while growing at 40%-45%.

Recommendation: I am adding $KNBE to my watchlist but not buying yet. I expect the company to base for 3-6 months ($20 – $30 per share until Jun / Aug 2021). I would watch 2 Quarters of public performance closely to give us an indication if this is worth buying.

$SNAP announced earnings today (Apr 22). Revenue was $769.6M (+66% YoY; $462M Q1 2020) vs expectations of $720 – $740M.

Adjusted EBITDA was $(2)M (+81% YoY; $) vs expectations of $(70)M to $(50)M.

EPS loss was $0.00 (+XX$ YoY; $(0.08) Q1 2020)

$SNAP Daily Active Users (DAU) was 280M (+ 22% YoY) vs 265M last quarter and expectations were 270M.

$SNAP APRU (Average Revenue per User) was $2.74 (+66% YoY) vs $2.6 expected.

Operating cash flow of $137M and Free Cash Flow of $126M.

Guidance

Revenue – $820 – $840M vs. $454M in Q2 2020.

Adjusted EBITDA – $(20)M to breakeven compared to $(96)M loss in Q2 2020.

Earnings slides and presentation.

$XM Qualtrics – a deep dive thread

SaaS company focused on the $60B "Experience Management" market that went IPO in Jan 2021

Stock price: $32.43
MCap: $16.58B
Vol avg: 2.5M
52WKL::52WKH $32.31 – $57.28
EV/2020 Sales – 35X
EV/2021 Sales – 29X
2020 FCF – ($114M)#research pic.twitter.com/usEfOQSTDD

— Mukund Mohan (@mukund) April 4, 2021

I wrote about Qualtrics $XM a few weeks ago and recommended an initial position at about $32 / share. Yesterday the company announced Q1 2021 earnings. Here is an update and earnings summary.

Highlights

 Q1 2021 Total Revenue of $238.6M, up 36% Year-over-year

DBNER (Dollar based net retention) was at 120%(constant), while customers spending more than $100K grew to 1,457 from 1338 in the previous quarter.

Margins remained steady at 77.2% (Subscription Margin is 90%).

Subscription revenue for the first quarter was $186.9 million, up from $128.3 million one year ago, an increase of 46% year-over-year.

Operating loss was $(196.6) million, compared to $(36.9) million one year ago.

The won several new customers from $APTV (Aptiv) and $DOCU (Docusign) to $TDOC (Teledoc) and $RCL (Royal Caribbean Cruise Lines)

Strong guidance for Q2 and year

Q2 2021: Total revenue between $240M and $242M (+30% YoY), up from $239M previously.

EPS (Loss per share actually of $0.01 – $0.03 (vs $0.04 previously).

Annual 2021: Total revenue between $980M and $984M (+29% YoY) up from $950 M previously.

Q1 Investor presentation and conference call transcript.

Netflix $NFLX reported Q1 EPS of $3.75, $0.78 better than the analyst estimate of $2.97.

Revenue for the quarter came in at $7.16 billion (+24% YoY) versus the consensus estimate of $7.13 billion.

Paid subscriber net additions were 3.98 million versus the guidance of 6 million. Total paid memberships (cumulative) were 208 Million (+14% YoY).

Average revenue per membership rose 6% year over year, or 5%, excluding a foreign exchange impact of +$80m.

Net cash generated by operating activities in Q1 was $777 million vs. $260 million in the prior year period.

Free cash flow (FCF) for the quarter was $692 million vs. $162 million in Q1‘20. We are on track for full year 2021 free cash flow to be approximately break even.

As we discussed last quarter, we believe we are very close to being sustainably FCF positive and that we no longer have a need to raise external financing to fund our day-to-day operations.

$NFLX Guidance:

$NFLX sees Q2 subscriber paid net additions of 1 million, versus the consensus of 4.4 million.

$NFLX sees Q2 revenue of $7.3 billion, versus the consensus of $7.39 billion.

$NFLX sees Q2 EPS of $3.16, versus the consensus of $2.68.

The shareholder letter & conference call transcript are available to review further details.