IPO Preview: Vision Marine Technologies Powers Up U.S. IPO Plan

IPOStreet

Vision Marine Technologies (VMAR) intends to raise $17.25 million in an IPO of its common stock, according to an F-1 registration statement.

The firm designs and manufactures electric outboard powertrains for marine use.

VMAR is well positioned to take advantage of a growing industry segment for environmentally friendly powertrains and marine vehicles, but the firm’s financial results have been hard hit by the Covid19 pandemic.

I’ll provide a final opinion when we learn more about the IPO from management.

Boisbriand, Canada-based Vision Marine was founded to develop advanced clean energy powertrain systems for marine applications.

Management is led by Chief Executive Officer Mr. Alexandre Mongeon, who has been with the firm since 2014 and was previously an importer of high-performance boats from the U.S. into Canada.

Below is a brief overview video of the firm's high-performance boats:

Source: Vision Marine Technologies

The company’s primary offerings include:

  • Quietude 156
  • Volt 180
  • Fantail 217
  • Bruce 22
  • Phoenix 290

Vision Marine has received at least $1 million from investors.

The firm acquires customers directly or through third-party dealers.

VMAR sells boats individually to consumers as well as to rental fleet operators and expects to build 150 boats in the twelve months after the IPO.

That production level would be significantly higher than the 46 and 21 boats it manufactured in the last two fiscal years.

Advertising & Promotion expenses as a percentage of total revenue increased sharply in the most recent quarter as revenues have contracted.

The Advertising & Promotion efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Advertising & Promotion spend, was negative (5.4x) in the most recent reporting period.

According to a 2013 market research report by IDTechEx, the global market for marine vehicles is expected to reach $6. 3 billion in 2023.

The market for electric outboard motors is expected to grow from 60,000 in 2013 to about 150,000 by 2023, with the market value increasing four or more times due to an expected move toward higher power versions.

The main drivers for this expected growth are additional green laws seeking to reduce environmental impacts of internal combustion engines on inland waterways and a rise in the breadth of hybrid and pure-electric options for varying applications.

Also, the industry faces a high degree of fragmentation, which may impede growth as well as the increase in competitive demand for lithium-ion batteries serving to increase costs.

Major competitive or other industry participants include:

  • Duffy Electric Boat
  • Electracraft
  • Pender Harbour
  • Elco Motor Yachts
  • Budsin Wood Craft
  • Ruban Bleu Electric Boats
  • Frauscher Boats
  • Boote Marian GmbH

Vision Marine’s recent financial results can be summarized as follows:

  • Contracting topline revenue
  • Reduced gross profit but increased gross margin
  • A swing operating loss
  • Increased cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

visionpl

Source: Company registration statement

As of February 29, 2020, Vision Marine had $89,675 in cash and $3.5 million in total liabilities.

Free cash flow during the twelve months ended February 29, 2020, was negative ($583,992)

Vision Marine intends to raise $17.25 million in gross proceeds from an IPO of its common stock, although the final amount may differ.

Management says it will use the net proceeds from the IPO as follows:

[...for] sales & marketing, build up inventory for order fulfillment, research & development, unallocated working capital and development of rental sales.

Management’s presentation of the company roadshow is not available.

The sole listed bookrunner of the IPO is ThinkEquity.

Commentary

Vision Marine is seeking U.S. public capital market funding for its expansion plans, which include a sharp increase in production in completed boats.

The firm’s financials show the harsh negative effects of the Covid19 pandemic on its sales and related metrics, with a sharp contraction in revenue in the six months ended February 29, 2020.

Advertising & Promotion expenses as a percentage of revenue have risen sharply; its Advertising & Promotion efficiency rate has dropped significantly.

The market opportunity for pure electric and hybrid power units for marine use is expected to grow substantially in the coming years as changing consumer behavior combined with technology advancements and government pollution strictures contribute to a growing market.

ThinkEquity is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (13.5%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

However, Vision Marine’s recent performance indicates its exposure to the lingering effects of the Covid19 pandemic, which may continue to dampen sales for some time to come, perhaps well into 2021.

While I like the industry growth prospects and the firm’s positioning, the economic environment may not be conducive to positive financial results for many quarters.

I’ll provide a final opinion when we learn further details from management.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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