PII - Massimo Group Seeks $25 Million In U.S. IPO

2023-12-20 11:17:59 ET

Summary

• Massimo Group, LLC has filed for a $25 million IPO of its common stock, although the final amount may differ.
• The company manufactures power sports vehicles and boats in the U.S.
• Massimo has shown strong growth, a healthy net margin, and generates free cash flow.
• I'll provide an update when we learn more about the Massimo Group IPO.

A Quick Take On Massimo Group

Massimo Group, LLC (MAMO) has filed to raise $25 million in an IPO of its common stock, according to an SEC S-1 registration statement .

The firm is a manufacturer of power sports vehicles and boats in the United States.

MAMO has produced strong growth in the most recent reporting period and generates a healthy net margin and free cash flow.

I'll provide an update when we learn more about the Massimo Group, LLC IPO from management.

Massimo Overview

Garland, Texas-based Massimo Group was founded to develop and sell mid-tier power sports vehicles and boating products to sports enthusiasts in the US.

Management is headed by founder, Chairman, and CEO Mr. David Shan, who has been with the firm since its inception in 2009 and obtained a bachelor's degree in international trade from Qingdao Ocean University of China.

The company's primary offerings include the following:

• ATV - all-terrain vehicles.

• UTVs - utility terrain vehicles.

• Pontoon and tritoon boats.

• Related products and accessories.

As of September 30, 2023, Massimo has booked a fair market value investment of approximately $2.0 million from investors, including Asia International Securities Exchange Co and the founder.

Massimo Customer Acquisition

The firm sells its products direct-to-consumer through dealerships, distributors, and through chain stores.

The company manufactures its products in its Dallas, Texas, facility while relying on a network of global partnerships for components and parts.

Selling expenses as a percentage of total revenue have trended higher as revenues have increased, as the figures below indicate:

(Source - SEC).

The Selling efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling expense, rose to 2.1x in the most recent reporting period, indicating increasing efficiency, as shown in the table below:

(Source - SEC).

Massimo's Market & Competition

According to a 2023 market research report by Grand View Research, the global market for all-terrain vehicles [ATVs] was an estimated $4.54 billion in 2022 and is expected to reach $6.1 billion by 2030.

This represents a forecast CAGR of only 3.8% from 2023 to 2030, a relatively slow rate of growth.

The main drivers for this expected growth are the growing popularity of outdoor sporting activities and increased demand for all-terrain vehicles in agricultural and military applications.

Also, the chart below shows the historical and projected future growth trajectory of the U.S. all-terrain vehicle market through 2030:

Major competitive or other industry participants include the following:

• Polaris Inc.

• American Honda Motor Co.

• BRP

• Yamaha Motor Corporation

• ArcticInsider.com

• CFMOTO

• Kawasaki Motors Corp.

• KYMCO

• LINHAI POWERSPORTS

• Suzuki Motor of America.

The company is active in other related markets.

Massimo Group Financial Performance

The company's recent financial results can be summarized as follows:

• Growing top line revenue.

• Increasing gross profit and gross margin.

• Higher operating profit and cash flow from operations.

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

(Source - SEC.)

As of September 30, 2023, Massimo had $1.2 million in cash and $30.2 million in total liabilities.

Free cash flow during the twelve months ending September 30, 2023, was $8.6 million.

Massimo Group IPO Details

Massimo intends to raise $25 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.

The company will be a "smaller reporting company" and an "emerging growth company." These designations allow management to disclose substantially less information to shareholders.

Such company stocks have frequently performed poorly post-IPO.

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

approximately 15% for the marketing and promotion of our branded products to expand our business;

approximately 10% for R&D activities, which include our efforts to develop new products and new EV-related technology;

approximately 20% to establish assembly/distribution operations in other parts of the United States;

approximately 5% for the recruitment of talented personnel; and

the balance of approximately 50%, together with any proceeds from the over-allotment option, for general administration and working capital.

(Source - SEC.)

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

Regarding outstanding legal proceedings, the firm is currently subject to two lawsuits alleging approximately $8.2 million in total amounts owed or damages. The company is also suing other defendants for breach of contract and other torts and is seeking injunctive relief and more than $40 million in damages.

The listed book runners of the IPO are Roth Capital Partners and Craft Capital Management.

Commentary About Massimo's IPO

MAMO is seeking U.S. public capital market investment to fund its new product development and general corporate working capital requirements.

The company's financials have shown increasing topline revenue, growing gross profit and gross margin, and more operating profit and cash flow from operations.

Free cash flow for the twelve months ending September 30, 2023, was $8.6 million.

Selling expenses as a percentage of total revenue have risen as revenue has increased; its Selling efficiency multiple rose to 2.1x in the most recent reporting period.

The firm currently plans to pay no dividends and retain any future earnings for reinvestment back into the company's growth and working capital requirements.

MAMO's recent capital spending history indicates it has spent lightly on capital expenditures as a percentage of its operating cash flow.

The market opportunity for power sports vehicles is moderate and expected to grow at a somewhat low rate of growth in the coming years.

Risks to the company's outlook as a public company include the potential for an economic downturn in 2024, negatively impacting sales.

The firm's likely market capitalization at IPO should be between $120 million and $150 million, based on a comparison with Polaris Inc. ( PII ).

When we learn more about management's assumptions on IPO pricing and valuation, I'll provide a final opinion.

Expected IPO Pricing Date: To be announced.

For further details see: