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GOED - 1847 Goedeker Inc


Pakari
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Hey guys! Has anyone here looked at 1847 Goedeker Inc (GOED)? Bad and very disjointed summary as you can probably read info/numbers easier from filings, I looked at it pretty briefly, so might be wrong info:

GOED is basically e-commerce appliance (mostly) & furniture retailer based in St. Louis that did an IPO last summer for 10m USD (1,1m shares for 9$, roughly 6-7m shares outstanding) to fund working capital needs + debt repayment. It was bought earlier by 1847 Holdings LLC (EFSH) from Steve Goedeker and Mike Goedeker in 2019 for 6,2m USD and some shares (Goedeker’s hold around 1m shares). EFSH later did the IPO of GOED and spun off rest of the shares to shareholders.

Recent years GOED has been 50-60m revenue breakeven/lossmaking firm (EBT 0,9m, 2m, -3,2m 2017-2019, -14m from operations 2020)

Because of COVID, orders received have suddenly doubled from 15m/QTR -> 30m+/QTR. This hasn’t translated to revenue growth since appliances industry has had supply problems (especially hitting GOED) and GOED hasn’t been able to fulfill orders to customers, revenue/order rate dropped from 80% to 43% 2020E, 37% Q3. Management has been investing in marketing and personnel to aid growth leading to huge losses in 2020 (probably way too aggressive), but company could get to somewhat easily if it could service orders due to improvement in appliances supply side + company operations.

Last year in October GOED entered into purchase agreement of e-commerce competitor Appliances Connection (300m+ revenue 10% EBIT 2020E). https://s25.q4cdn.com/225826556/files/doc_presentations/GOED-Acquisition-PRESENTATION-November-24-2020-UPDATE.pdf

Purchase price currently is 180m in cash + 21m (2,33m shares @ 9) + 21m in shares (divided by 20 trading days immediately preceding the 3rd trading day prior to the closing date of the transaction). Outside date is May 31, previously it was 90th date from purchase agreement, changed in December.

Big question is obviously financing of acquisition, there was going to be more info/details about it later (as mentioned in November call https://investor.goedekers.com/events-and-presentations/event-details/2020/1847-Goedeker-Provides-Update-on-Appliance-Connection-Acquisition/default.aspx ) but no information about that came. Acquisition was planned to happen in Q1 2021 but it was delayed to Q2 at the last minute with no info prior to announcement (and it was said to be “on track Q2…” LOL. I think they were positive about the acquisition in 2020 conference call but cannot tell for certain. 2020 numbers looked very nasty, especially Q4 was horrible in terms of gross margin + expenses + possible sales tax which could really mess things up. Likely going bankrupt as a standalone firm. Looked a lot better before Q4 numbers, very ugly now. There was an accounting firm change in December.

A lot of it is based on management projections, but I think the shares might be attractive if they manage to pull off the acquisition with minimal dilution. Obviously less attractive with more dilution, but probably not horrible situation if the acquisition is completed.

Share price is currently 9$. Let’s say roughly future 12m shares with 180m debt, 300m EV results in EV/sales of 0,8 2020E, EV/EBITDA was projected to be 12 2020, but it’s probably more like 20 currently combined (again don’t know how much of the expenses are really one-time) hopefully growing revenue due to order fulfillment rate increases + growth, with some operating leverage + scalability and attractive returns on invested capital after scaling.

Management goal in November was 555m for 2021 and 1B combined revenue for 2023, obviously equity would be valuable if that scenario happened. I think that Goedeker’s standalone revenue 165m 2021F is pretty much impossible (supply side problems were projected to start to improve at Q2/21, but hard to know in advance how fast that comes, no real improvement recently and goal requires further order growth, which might not come). Appliances Connection revenue goal of 389m 2021F is probably feasible.

Public float is/was very small 1-2m, lots of insider ownership, high/weird volume sometimes during the day/AH in this stock – no idea what is going on there.

A lot of risks regarding supply-side, acquisition/financing + execution, not sure how much of the growth is sustainable compared to being usual e-commerce COVID spike. Goedeker’s is unsurprisingly getting a lot of shitty PR from super long order delivery times/order cancellations/customer service complaints (Company takes the money beforehand and has almost no inventory, negative WC because of model + large losses recently, cancellations could be a big risk) https://www.bbb.org/us/mo/ballwin/profile/major-appliance-dealers/goedekers-0734-110208035

I don’t really know what will happen and I don’t have strong feelings about the stock, big chance of zero though and it could be in too hard/too scary pile for me 😊

https://www.sec.gov/ix?doc=/Archives/edgar/data/1810140/000121390021018284/f10k2020_1847goedeker.htm 2020

https://s25.q4cdn.com/225826556/files/doc_presentations/GOED-Acquisition-PRESENTATION-November-24-2020-UPDATE.pdf acquisition presentation + forecast numbers (not current).

https://investor.goedekers.com/news/default.aspx GOED and AC order + revenue numbers have been released monthly recently.

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Nice write-up. I grew up in STL so this is kind of near to my heart. I agree, it's in the scary pile. No idea where they're going to get the $180 million to buy Appliances Connection because it's not coming from retained earnings, that's for sure.

 

 

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  • 2 months later...

Been digging a little. Thought this was an odd footnote that I don't really understand (italicized part). Maybe someone else can translate.

 

Customer deposits represent the amount collected from customers when an order is placed. The deposits are transferred to revenue when the order ships to the customer or returned to the Company if the order is subsequently cancelled.

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I assume that’s a mistake. It should be returned to the customer.

 

this one is definitely hairy. Given the size, quality of earnings is a serious concern of mine. I don’t think they had tier one legal/financial/accounting advisory on this - yes they are typically fee suckers but they’re really all you have as a public/retail shareholder. 

that said I got long the warrants early June, seemed a decent risk reward to me. Will probably hang around for the ride at this point. 

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I'd hope it's a mistake. I read it as an order that is cancelled by a customer is still counted as revenue. Maybe it's just a mistake. There is all sorts of hair on this and a lot of promotion from twitter, MCC, etc. going around. I find it odd that the old owners of Appliance Connection took barely any ownership of the new company. Why did some good business just fall into the laps of Goedecker at a good price? I doubt the sellers are idiots. 

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