As a researcher studying IPOs, I like to read S-1s although it gives me a headache due to its length and complexity. However, as I read more, I am getting better. I remember when I first read the 10-K. Well, actually, it was magical but still I struggled. Now time for the S-1s :D
Today I cover Bojangle's S-1.
Here are my notes, I actually go through the filing now.
1. Not a big fan of pictures....
2. Bojangles is 38 yr old. Breakfast menu ears $650,000 per restaurant...
3, Adjusted EBITDA is here...meaning that they are not really making a profit....Revenue is growing at 12% from 2011 to 2014. Net income grew five fold from 2011. to 2014. Hmmm...why don't they emphasize net income growth?!
4. Ok, they say people are loving more breakfast and chicken. I guess it's true, breakfast menu from McDonalds been doing well and chicken seems to be the new beef (?)
5. Population growth in the south is higher than average?! Ok, this is bad comparison, CA is growing quite fast...averages can be deceiving.
6. Yes, loyal culture. I know because I lived in NC for longer than I expected :p
7. Average check was $6.68, this is clearly affordable.
8. Emerging growth company~ and controlled company exemption....wow, talk about lack of disclosure. This is bad.
9. Wow, it has an operating margin of 10% and a net income of 5%, this is actually quite impressive for a restaurant!
10. Ok, I literally took this from the S-1.
"Adjusted EBITDA represents company net income before interest expense (net of interest income), provision for income taxes, depreciation and amortization, items that we do not consider representative of our ongoing operating performance and certain non-cash items"
So Bojangles doesn't pay interest and taxes and there is no wear and tear? Man, I corporate finance was an important part for 99% of the firms....guess not...
11. Chicken price is a major risk. Chicken feed price is rising....Ohh...one supplier. This is a risk...
12. Strict covenants hmmm...
13. Ok...the risk factor section basically puts everything that can go wrong...haha too much. I am surprised that they did not put act of God. Yes, they have one store in Honduras and there are worried about foreign corruption act.
Wow they are even worried about analyst coverage....
14. Don't know how to interpret option tables...what is high? what is low? should study.
15. It is PE backed, a relatively new board...
16. Certain relationships and related party transactions: Advent basically runs the firm..They also have the staggered vote, and all the anti-take over defenses.
17. Nothing much with underwriters, law firms, and auditors.
18. Why the heck does it have such a large goodwill?
19. Ok they have an interest swap for their debt...hmmmm....Adjusted EBITDA does not consider interest rate payment and they have an interest swap...hmmmmm
Love the profit margins but concerned about the lack of transparency and limited growth prospect. Can it go further west or even south?
For now, no recommendation.
PS
Took me about 50 minutes to go over quickly. Please do your full due diligence. I just did this exercise to show how to skim through S-1. Skimming is never sufficient and can lead to disasters so please do your homework :D
*From Bojangle's S-1
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