DAVIDsTEA Inc. (NASDAQ: DTEA) made a huge run on its initial public offering (IPO) on Friday. Some 5.1 million shares entered that market around $25 apiece. The offering consists of 2.99 million shares sold by the company and 2.11 million shares on sale from the selling shareholders. The company will only receive proceeds from the stock it is selling.
The underwriters for the offering are Goldman Sachs, BMO, Merrill Lynch, William Blair and JPMorgan.
DAVIDsTEA is a fast-growing branded beverage company, that operates through 161 DAVIDsTEA stores as of the end of April. There are in-store “Tea Guides” to help novice and experienced tea drinkers alike. There is a selection of roughly 150 varieties of premium teas and tea blends featured on the “Tea Wall,” which is the focal point of the stores.
The company sells its products exclusively through its retail and online channels, giving it control of the presentation of its brand as well as greater interaction with the customer. DAVIDsTEA has a dedicated and highly experienced product development team that is constantly creating new tea blends using high-quality ingredients from around the world.
In the IPO filing, the company said:
By continually offering new products and refining our blending techniques to enhance existing teas, we believe we bring new customers into the category and drive the frequency of visits to our stores and website among existing customers. We bring newness and capitalize on our product development capabilities with approximately 30 new blends each year that we rotate into our offering on a continuous basis. We also focus on product innovation in our accessories, providing our customers with fun, inventive and more convenient ways to enjoy tea. We believe that our product development platform and level of innovation have helped us earn a strong and loyal customer following that is passionate about DAVIDsTEA.
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A few highlights on the financials:
- The growth of our store base from 70 stores in fiscal 2011 to 154 stores in fiscal 2014, representing a 30% compound annual growth rate. As of January 31, 2015, we had a total of 154 stores or approximately 24% more than at the end of fiscal 2013. As of May 2, 2015, we had 161 stores in North America.
- Twenty-two consecutive quarters of positive comparable sales growth through the end of fiscal 2014. On an annual basis since fiscal 2011, we have reported double-digit comparable sales growth ranging from 33.4% in fiscal 2011 to 11.1% in fiscal 2014.
- An increase in sales from $41.9 million in fiscal 2011 to $141.9 million in fiscal 2014, representing a 50% compound annual growth rate. Sales in fiscal 2014 were approximately 31% higher than in fiscal 2013.
- Growth of our Adjusted EBITDA from $7.7 million in fiscal 2012 to $21.9 million in fiscal 2014, representing a 68% compound annual growth rate. Adjusted EBITDA in fiscal 2014 was approximately 54% higher than in fiscal 2013. Our net income was $(4.4) million, $(6.2) million and $6.5 million in fiscal 2012, 2013 and 2014.
The company intends to use a portion of the net proceeds of this offering to repay the full amount outstanding under its term loan agreement with Rainy Day. In addition, it also intends to use a portion of net proceeds of this offering, together with cash on hand, to repay amounts outstanding under the revolving facility. Finally, the company expects to use the remaining balance of the net proceeds for working capital and other general corporate purposes.
Shares were up 42% on the day to $27.00 as trading concluded on Friday, within a 52-week trading range of $14.20 to $27.02.
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