A Quick Take On Perfect Moment Ltd.
Perfect Moment Ltd. (PMNT) has filed to raise $15 million in an IPO of its common stock, according to an SEC S-1 registration statement.
The firm designs and sells luxury sport-oriented clothing worldwide.
Perfect Moment Ltd. revenue dropped sequentially in the most recent reporting period due to a seasonal wholesale sales drop, while operating losses remain high.
I’ll provide a final opinion when we learn more about the IPO from management.
Perfect Moment Overview
London, UK-based Perfect Moment Ltd. was founded to develop luxury lifestyle branded apparel for women, men and children.
Management is headed by Chief Executive Officer Mark Buckley, who has been with the firm since November 2022 and was previously CFO of Rapha Racing Limited, a producer and retailer of cycling clothing.
The company’s primary offerings include the following:
-
Skiwear
-
Outerwear
-
Swimwear
-
Activewear.
As of June 30, 2023, Perfect Moment has booked fair market value investment of $36.7 million from investors, including Mark Tompkins, Lucius Partners, NJJ Ventures and Purpose Pebble America LLC.
Perfect Moment Customer Acquisition
The firm sells its products direct to consumers and through its wholesale channel in 25 countries.
The company also sells through Farfetch and Amazon Luxury.
Marketing and Advertising expenses as a percentage of total revenue have risen sharply as revenues have fluctuated, as the figures below indicate:
Marketing and Advertising |
Expenses vs. Revenue |
Period |
Percentage |
Three Mos. Ended June 30, 2023 |
71.8% |
FYE March 31, 2023 |
21.4% |
FYE March 31, 2022 |
25.8% |
(Source – SEC.)
The Marketing and Advertising efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Marketing and Advertising expense, fell to 0.3x in the most recent reporting period, indicating a reduction in marketing and advertising efficiency, as shown in the table below:
Marketing and Advertising |
Efficiency Rate |
Period |
Multiple |
Three Mos. Ended June 30, 2023 |
0.3 |
FYE March 31, 2023 |
1.4 |
(Source – SEC.)
Perfect Moment’s Market & Competition
According to a 2022 market research report by Grand View Research, the global activewear market was an estimated $303 billion in 2021 and is forecasted to reach $450 billion by 2028.
This represents a forecast CAGR of 5.8% from 2022 to 2028.
The main drivers for this expected growth are a growing desire by consumers for modern clothing in their everyday activities while incorporating more sports and fitness activities in their weekly schedule.
Also, the chart below shows the U.S. activewear market’s historical and projected future growth trajectory through 2028:
Major competitive or other industry participants include the following:
-
adidas AG
-
Nike
-
PUMA SE
-
The Columbia Sportswear Company
-
VF Corporation
-
PVH Corp.
-
ASICS Corporation
-
Skechers U.S.A.
-
Under Armour
-
Others.
The firm sells its products outside the U.S. and in other premium active clothing market segments.
Perfect Moment Ltd. Financial Performance
The company’s recent financial results can be summarized as follows:
-
A sharp sequential drop in topline revenue
-
Reduced gross profit and gross margin
-
Increasing operating losses
-
High cash use in operations.
Below are relevant financial results derived from the firm’s registration statement:
Total Revenue |
||
Period |
Total Revenue |
% Variance vs. Prior |
Three Mos. Ended June 30, 2023 |
$ 988,000 |
28.5% |
FYE March 31, 2023 |
$ 23,438,000 |
42.5% |
FYE March 31, 2022 |
$ 16,447,000 |
|
Gross Profit (Loss) |
||
Period |
Gross Profit (Loss) |
% Variance vs. Prior |
Three Mos. Ended June 30, 2023 |
$ 105,000 |
25.0% |
FYE March 31, 2023 |
$ 8,069,000 |
63.0% |
FYE March 31, 2022 |
$ 4,949,000 |
|
Gross Margin |
||
Period |
Gross Margin |
% Variance vs. Prior |
Three Mos. Ended June 30, 2023 |
10.63% |
-0.3% |
FYE March 31, 2023 |
34.43% |
14.4% |
FYE March 31, 2022 |
30.09% |
|
Operating Profit (Loss) |
||
Period |
Operating Profit (Loss) |
Operating Margin |
Three Mos. Ended June 30, 2023 |
$ (2,709,000) |
-274.2% |
FYE March 31, 2023 |
$ (8,625,000) |
-36.8% |
FYE March 31, 2022 |
$ (10,177,000) |
-61.9% |
Net Income (Loss) |
||
Period |
Net Income (Loss) |
Net Margin |
Three Mos. Ended June 30, 2023 |
$ (2,673,000) |
-270.5% |
FYE March 31, 2023 |
$ (10,305,000) |
-44.0% |
FYE March 31, 2022 |
$ (12,168,000) |
-74.0% |
Cash Flow From Operations |
||
Period |
Cash Flow From Operations |
|
Three Mos. Ended June 30, 2023 |
$ (803,000) |
|
FYE March 31, 2023 |
$ (3,510,000) |
|
FYE March 31, 2022 |
$ (3,564,000) |
|
(Glossary Of Terms.) |
(Source – SEC.)
As of June 30, 2023, Perfect Moment had $1.1 million in cash and $16.5 million in total liabilities.
Free cash flow during the twelve months ending June 30, 2023, was negative ($2.1 million).
Perfect Moment Ltd. IPO Details
Perfect Moment intends to raise $15 million in gross proceeds from an IPO of its common stock, although the final figure may differ.
No existing shareholders have indicated an interest in purchasing shares at the IPO price.
Management says it will use the net proceeds from the IPO as follows:
[…] we currently intend to use the net proceeds to us from this offering for general corporate purposes, including working capital, sales and marketing activities and general and administrative matters. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.
(Source – SEC.)
Management’s presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, management believes that any legal proceedings would not have a material adverse effect on its financial condition or operations.
The listed bookrunners of the IPO are ThinkEquity and Laidlaw & Company [UK] Ltd.
Commentary About Perfect Moment’s IPO
PMNT is seeking U.S. public capital market investment to fund its general corporate growth and working capital requirements.
The firm’s financials have produced a strong sequential drop in topline revenue, lowered gross profit and gross margin, greater operating losses and high cash use in operations.
Free cash flow for the twelve months ending June 30, 2023, was negative ($2.1 million).
Marketing and Advertising expenses as a percentage of total revenue have risen sharply as revenue has dropped; its Marketing and Advertising efficiency multiple fell to 0.3x in the most recent reporting period.
The firm currently plans to pay no dividends and retain any future earnings for reinvestment back into the firm’s growth and working capital initiatives.
PMNT’s recent capital spending history indicates it has continued to spend on capital expenditures despite negative operating cash flow.
The market opportunity for premium activewear is large and expected to grow at a moderate rate of growth in the coming years.
Business risks to the company’s outlook as a public company include its focus on a direct-to-consumer revenue model, which has proven to be difficult to scale by other apparel industry companies.
The firm has also shown a sharp sequential drop in topline revenue, likely due to ‘minimal wholesale revenues during the first quarter’.
Additionally, operating losses in previous periods remain very high.
When we learn more about management’s assumptions on IPO pricing and valuation, I’ll provide a final opinion on Perfect Moment Ltd.
Expected IPO Pricing Date: To be announced.
Read the full article here