Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hey, big spender!
So, you claimed to have purchased 50,000 shares as of February 6 and you were looking to buy more.
If you stopped at 50,000 and got them at the low, low price of 51 cents/share, you spent over $25,000.
So, if you spent "30x more" on the franchise, that puts you at over $750,000. So, rounding off, you are claiming that you have purchased around 12 kiosks? And, if so, how many are installed? And how many are in "soft opening" mode?
Losing almost 30% of your franchisees in a single quarter?
I think that's a metric that matters. And it makes sense that VEND is suspending or reducing royalty payments in an effort to hang on to more of its disgruntled horde of franchisees.
Something tells me that these folks were not enjoying sales of 167 serves on a Saturday.
I'd love to know what the average/median/normal distribution of sales/kiosk/day might be, but the transparent folks at VEND don't seem interested in sharing that info. Sooner or later, the franchise disclosure document will have to list it instead of continuing to rely upon those heady early days when only 3 kiosks were out there in super-premium locations. I'm surprised that the state regulators have permitted VEND to go this long without updating its franchisees' performance information.
Any prospective franchisee who can do eighth grade math will be able to see for himself whether it's a good idea to fork over $58,000 per kiosk.
Let the accounting games begin with inventory.
So, it was a bit curious that the cost of sales for this quarter was so high. It turns out there's an explanation for that hidden in the text of today's press release. True to form, VEND makes you dig out the information rather than highlighting it.
Here's the phrase with the clue from the new CFO - he refers to "...recognizing an inventory adjustment during the quarter."
So, if you apply the fairly high cost of sales for the previous quarter (about 96%) for the current quarter, that suggests that VEND took a $1.7 million inventory charge.
So, here's the accounting game, and VEND is by no means alone in pulling this sort of stuff, although most companies would make it clear what happened rather than bury it in the COGS. If VEND takes an additional $1.7 million charge in the current lousy quarter, it can boost profitability in subsequent quarters. So, we can now expect the 4Q numbers to be boosted not only by an increase in deliveries and revenues, but a miraculous improvement in the gross profit margin. They won't get the full benefit of the $1.7 million bump in the next quarter, of course, but it will help then and in subsequent quarters.
Fun games!
Thanks for the insight.
My obsession will have to remain unsatisfied for the time being.
That said, my calculations on the net loss in franchises don’t lie. It looks like the company needs to be even more generous in order to keep the boys down on the kiosks.
You know that I'm obsessed with cups per day.
OK, I'm maybe just obsessed.
Anyway, the royalty figure for the 89-day period ended March 31, 2019, was $88,940.
So, using the $4.50 per cup figure that VEND seems to favor and assuming around 180 to 200 kiosks in operation, that amounts to an average of 10 cups per day over that 89-day period.
If you want to give them the benefit of the doubt and fudge a bit, assuming that there were only 150 units in operation, then it edges up to about 12 cups/day.
Anyway, once the hapless franchisee has shelled out his money for the kiosk, he may not be likely to bail on VEND, but once these figures hit the franchise disclosure documents, it's hard to see how any prospective franchisee will get excited about the prospect of selling less than 15 cups a day.
There has a precipitous decline in units sold.
As of 6-30-18, there had been 1,417 units sold.
As of 12-31-18, there were 1,290 sales pending plus 188 delivered for a total of 1,478, a slight increase over the 6-month period.
As of 3-31-18, there were only 957 sales pending and only 186 net deliveries, for a total of 1,143 units accounted for.
That's an alarming decline of 335 units in a 3-month period. VEND has lost the equivalent of roughly 112 franchisees (at 3 machines per) during the calendar quarter. That's more than one franchisee per calendar day.
But not to worry, cuz Nick says that they are getting rid of all those pesky $38,000 sales and replacing them with $58,000 sales.
It's interesting to watch how this will play out, and it might actually turn out to be a blessing in disguise. As they hemorrhage franchisees, they may manage to finally get their delivery schedule synced up with their new sales and at a profitable price point.
On the other hand, if franchisee defections continue to outpace new sales at this rate, there won't be much need for deliveries come 2020.
Thank you for admitting that your statement was inaccurate.
Direct quote from VEND's September 18, 2017 press release:
"Utilizing the prototype units developed exclusively by Lancer Corporation and scheduled for certification and validation with both Underwriters Laboratories and the National Sanitation Foundation, the global manufacturer will be delivering an initial rollout schedule of 1,000 units of which 760 were pre-sold by June 30th, 2018 with the first units being ready for installation in November 2017."
I suppose you are going to tell me that "developed" doesn't mean "manufactured", just as you seem to be suggesting that a "contract manufacturer" that does not actually manufacture a single unit is not a "manufacturer"?
Here's a simple question - Who physically built the prototypes? And what exactly did Lancer do when it "developed" them?
I don't think I've stated any inaccuracies, but if I have, it is attributable to the lack of clarity on the part of VEND, which is a constant problem.
Am I the only one bothered by this?
I have been a little confused about the capabilities of the beloved kiosk. In photos and videos (of the more recent version of the machine, not the original version, which was larger and seems to have had more capabilities), there appear to be only two spigots that have a flavor attached, accompanied by a third spigot to provide the twist option.
Nevertheless, VEND repeatedly (usually) touts its "6 flavor system". I think sometimes, and in some pics, they even show 7 flavors.
The only way I think that they can justify a claim of 6 or 7 flavors is that those flavors are all made available to the franchisees, but the actual options at the kiosk in operation are limited to the 2 flavors that the franchisee has elected to stock. And those 2 flavors are usually just chocolate and vanilla, although I have seen an instance of cookies and cream.
Anyway, what bothers me is that the claims of a "6 flavor system" are misleading to someone who isn't familiar with the kiosk in operation.
If I'm the only one this bothers, so be it, but I think it's another instance of intentional misleading.
Nope, it was for manufacturing as well. The agreement was filed with the SEC if you're interested. It seems that the agreement was short-lived and never resulted in the production of any units. The prototypes were manufactured by Lancer Corporation, followed by the selection of Flex.
I'm not sure what you mean by that, but in 2017, VEND signed an exclusive contract manufacturing agreement with D&K Engineering, and it has repeatedly stated that it has an agreement in the works with Stoelting. Flex, meanwhile, is on the way out.
By my count, that is either 2 or 3.
Some Johnny Tarr-style good news.
I was somewhat surprised that the net decline in cash for the quarter was only about $280,000. And, even better, the decline comes just about entirely from the reduction in the amount of restricted cash.
I'll have to dig into this a bit more, but there's no denying that that's a whole lot better than the nearly $8.8 million in cash they flew through in the six months ended December 31, 2018.
I'll be back.
More misinformation - VEND manufacturing relationships are so-so, and there will not be 2 manufacturing lines.
VEND hinted at this in an earlier announcement, but its latest 10-Q makes it clear - They are not going to have multiple kiosk suppliers, at least not beyond a transition period. They are hoping to (no final contract has yet been announced) make arrangements to have Stoelting manufacture the kiosk, and FLEX will be around only for a transition period while Stoelting picks up.
This makes some sense given the horrible performance thus far by FLEX. The 10-Q also noted that 34 kiosks had to be removed from service in February and March, bringing the total in actual use down to 186 as of March 31.
So, FLEX will be winding down, while Stoelting will be winding up. It seems to me that any predictions regarding expected deliveries in the second half of 2019 are only slightly better than speculation.
AMAC does not appear to have any control over airport concessions, so I believe that the initial press release was somewhat misleading.
AMAC does seem to be involved in assisting minorities in obtaining airport concession rights, so my guess is that AMAC might conceivably help VEND out by promoting it to its constituency while promoting its constituency to airports. And I suppose that could be helpful, but it's a long way from an agreement to place kiosks in airport terminals.
The more recent info suggests to me that AMAC will be paid for any introductions it makes that result in VEND getting a kiosk into an airport.
I predict a dramatic increase in total liabilities.
Anybody know when the 10-Q will be released?
doesitreallymatter and I are looking forward to it.
You have deleted one or two of my posts, and I thought the deletion was appropriate. That said, it sure is fun having RoBoZo on the board, so if you choose to leave a few posts up for entertainment value, we'll probably enjoy that.
Maybe he shouldn’t, but I don’t know and I am glad he did. Do you believe that he has a duty of confidentiality or do you think that it’s just a bad idea to share that info?
The airport stuff is mentioned in the press release, although it lacks important details.
As for inside information, unless he’s under a confidentiality agreement, he’s free to share. Unless he’s Nick Yates in disguise, that is.
OK, so here are a few follow-up questions for you. I completely understand if you won't or can't answer them, but I think they are legit questions.
1. When were the kiosks placed in Walmart stores? It seems that must have been a while back. Were the units that were placed with Walmart subject to the same performance issues that plagued the other units in the field? I would think that must have been the case. So, perhaps the delay in getting farther along with Walmart has to do with reliability concerns? And perhaps those concerns will be addressed with the most recent updates?
2. If there's a private offering at $0.50/share, why would I (or anyone else) buy shares on the public market at $0.77 or even $0.60, for that matter? If I want the shares, I'd call Nick. I assume there's a 6-month lockup, but that's no big deal for a decent discount. And if I'm already a shareholder, why would I want to hold shares that I can sell for 77 cents when there's a big block of shares being sold at 50 cents that might flood the market in 6 months?
Thanks for some real information, smokey. I appreciate it.
I may have some follow-up questions, but you are, of course, free to respond or not as you see fit.
The recent price rise is remarkable.
Dear smokey, I tend to believe Alvie when he says something, but you.... I just don't know.
So, here's what you've told us so far:
- "Exciting news will be coming very soon". Thanks for that. I would never have guessed. May I ask of what type and when? I didn't think so.
- "Looks like Stoelting will be supplying the kiosks later this year". Thanks for that. I would not have known that unless I had read one of the two dozen pieces in which it was mentioned. May I ask you whether the agreement was ever finalized? I didn't think so.
- There's a private placement under way. Thanks for that. I would only have known that if I looked at their web site. May I ask (a) for how much? (b) at what price?, and (c) how much has been raised thus far? I didn't think so.
- "There is more news coming out". Thanks for that. I would never have imagined.
- You are a "qualified" investor, but you didn't answer doesitreallymatter's question about how you were qualified. (By the way, it's not all that impressive that you are an accredited investor, as the bar is reasonably low.)
- "...by the end of the year, they will be shipping twice as many units per month". So, by December 31, 2019, they will be shipping 150/month, or is it 250/month or 300/month or what? And we need to wait 8 months to see whether your prediction is correct?
"perhaps even getting into a big box retailer"? Come on, that's been rumored for years, and at least the more recent rumors have been specific enough to name Wal-Mart as the potential. Can you be more specific? I didn't think so.
You "Invested a bunch of $$ in their last placement offering." Oh, really? When? How much? At what price per share? Can't tell us? I didn't think so.
"Better start buying in now". Yeah, it's really hard to pass up a recommendation like that coming from someone like you who is so obviously well-informed with inside information.
You know, I like hearing what Alvie, FroYoMan, Johnny Tarr, Sonata and a few others have to say because they seem to know what they are talking about. You? Not so much. Has anyone introduced you to RoBoZo?
What we know from VEND's public filings:
- A whopping $17.6 million was raised in FYE 6-30-18 from private placements.
- Issued and outstanding shares more than doubled in FYE 6-30-18, mostly as a consequence of the private placements.
- Less than $3 million was raised in the 6 months ended 12-31-18, and that was raised at around $1.50/share.
- An investor that purchased 300,000 shares at $1.00 in mid-2018 had the right to but declined to purchase additional shares over the balance of 2018 at prices of $1 or $1.50 per share.
- Only $1.2 million was raised in the 19 Degrees offering as of March 31.
It will be interesting to see how much was raised in the most recent quarter.
I suppose there may have been a private placement in 2019?
You can see from the financials for 12-31-18 that the private placement(s) in that quarter were in the $1.50/share range.
Like doesitreallymatter, I had been thinking that the current offering must be in the vicinity of 30 cents a share.
I may follow up with more thoughts on this, but in general, it's bad (for a number of reasons) for a public company to engage in dilutive private placements of its equity securities. In VEND's case, the situation is interesting, given the length of time and number of times that private offerings have been made. A lawyer or SEC enforcement person might be tempted to characterize their conduct as a continuous offering that does not qualify for a private placement exemption, but I haven't looked at it hard enough to say. Aside from that, it just plays hell with the stock price and the potential returns that are available to retail public investors.
The 19 Degrees offering seems to have failed to raise sufficient capital, so I suppose VEND has no choice other than to continue to pursue private placements at lower and lower prices.
Those who invested in earlier rounds or who are considering investing in current offerings have every incentive, of course, to pump the price.
Oh, Upinsmok, we just met but you have already titillated me so much with your teasing obtuse references! You clearly have inside information that you don't deign to share, but you will kindly let us know of things that are out on the vague horizon so that when the time comes, you'll be in line to claim you told us so!
I love it! Do it some more!
Will there be a large yellow-orange globe of some sort that appears on the eastern horizon? Or is that giving away too much of your precious insider's knowledge? Maybe you should just let us know that there are some astronomical developments coming our way? Yeah, that's the ticket!
If they could work through the backlog of earlier low-priced sales and get enough kiosks out and operating to make the royalty stream meaningful before they run out of cash, they could be looking much better.
Like it is for a lot of "start-ups" (assuming VEND could be called that), it's a bit of a race between cash burn and ramping up revenues.
They have a ways to go, which is why the quarter that just ended and the current quarter are critical.
All that said, VEND might pull the proverbial rabbit out of its hat (or some other orifice).
I agree, you are confused.
I am not sure that it's good to be confused, unless you wish to ignore the otherwise obvious.
$3 million/month isn't enough to keep the lights on. As you seem to be suggesting, that's heading in the right direction, but that may or may not be "good" enough. Even if they sold 150/month for $6 million, it probably wouldn't be enough to show a profit.
So, if you want to believe that $3 million is good, you may want to remain confused. That would be good.
He says whatever he wants expecting belief.
Yeah, but something doesn't add up, no matter how you try to reconcile.
- 262 installs at the end of April, per today's press release
- 70 to 90 installs predicted for May, per today's press release, which would bring us to a max of 352 and a minimum of 332 by May 31
- up to 440 total installs by the end of June, per the press release of two days ago, meaning that there are expected to be no more than 108 installs in June.
None of this comes close to legitimizing a claim of achieving a "capacity" of 150 kiosks per month in May. The predicted 150 kiosks capacity was intended to lead a reasonable person to conclude that within the next month or two, they would be installing 150/month. That was intentionally misleading.
At least they managed to beat the fairly modest estimates for April installs. Nick should try doing that more often - underpromise and overdeliver. Instead, he has a fairly unblemished string of promising the moon and delivering disappointment.
On April 9, 2019, Nick Yates indicated:
"...the company has ... increased their monthly capacity allowing more than 150 robotic kiosks per month as of May, 2019."
So, based on today's press release, that was a lie?
I agree with you insofar as you point out that some of us, myself included, have assumed that VEND is beholden to FLEX for inventory obligations, and that that assumption may be incorrect.
Do you have reason to know that it is not correct? Do you know that VEND purchases components directly from suppliers as opposed to purchasing them through FLEX? I'd be interested in knowing.
There are a number of different ways in which the purchase arrangements and related credit obligations might be arranged, and they could change over time, for that matter.
One intriguing possibility is that the attempt to establish a manufacturing relationship with Stoelting may be driven in part by the fact that Stoelting is the supplier of one of the most expensive components of the kiosks, if not the single most expensive component. Stoelting should be better-positioned to help VEND with its cash flow problems than FLEX.
Of course, regardless of whether it's Stoelting, FLEX or other vendors, VEND's credit should be a real concern to sellers. As of December 31, VEND had managed to pile up over $7 million in accounts payable, and total debt of over $13 million even if you ignore the deferred revenues from franchise sales. Credit managers should be tightening up on VEND, although I suppose their vendors may be enjoying high profit margins on their sales to VEND that they don't want to miss out on.
For what it's worth, here are the numbers as of December 31, 2018:
Inventory - $11.9 million
Deposit for inventory - $2.7 million
Restricted cash - $4.6 million
That's about enough for 600 machines or so, I suppose (probably more like 500 to 550 kiosks), so they have plenty of resources to solve for that problem for a while. The bad news here is that their gross profit on the 200 or so machines they have or will install in 2019 through June 30 will only come to $1.0 million (and that's assuming that Nick gets his production cost down from $39,000 to $35,000, so it's probably less) since these current sales are at the low low price of $40,000 (and before RoBoZo argues with me about that $40,000, it's taken straight from yesterday's press release). The press release also indicates that the sales for the balance of calendar year 2019 will carry an average price of $41,000, so it's moving up, but very slowly.
The problem they face is that the profits from sales of kiosks are very low and will not provide net cash flow sufficient to cover operating expenses. The operating expense beast that must be fed consumes about $1.7 million a month. As I've said before, they need to (a) reduce operating costs, (b) increase profitability on sales of kiosks, and (c) raise capital.
They could also increase liquidity by driving those inventory numbers and deposits for inventory down, but with a prospective increase in production, those figures should be expected to increase, not decrease. If the production problems can fairly be placed at the feet of Flex, maybe VEND has some negotiating power to get some relief on that front. Given VEND's weak credit, though, I would not expect Flex to loosen credit requirements. They could also find new franchisees whose investments are not required to be held in escrow.
If they had any private placements since December 31, they should have disclosed them in filings. The only filing of that sort that they have made since December 31 has been related to the 19 Degrees offering, and they haven't raised much in that offering since they last discussed it. As of April 1, they had raised a total of $1.2 million through that offering.
Let's see what they report in the next 10-Q. There may be some surprises on one or more of those fronts. Who knows, maybe they will convince Flex to let them work through the current inventory without having to replace it for a while. That would potentially free up a lot of cash. Nothing that has been announced to date, however, gives any reason to expect any progress on those lines.
I agree, they are running on fumes.
I don’t see how VEND can maintain sufficient liquidity, and I look forward to the next 10-Q.
Wherever the additional cash comes from, it won’t be from deliveries on those old $38,000 sales.
Therein lies the problem.
With as often as it happens, it can't be unintentional. Yates spouts numbers all the time without a meaningful reference.
One day he's talking 250, another day 240, another day 200, another day 150/month, another day 100/month, and on and on, almost never with a precise time reference. And he rarely provides those numbers all together in the same press release or interview. It can be amusing to parse through all the public announcements to pin him down, but it shouldn't be necessary. And, by the way, VEND's press release today shows that Yates' most recent 150/month "capacity" statement for May is a lie or, at best, intentionally misleading.
Protestations of transparency notwithstanding, it is impossible to pin down exactly where things stand at any particular point in time with respect to number of kiosks, franchisees, cups sold, and so forth.
It's no accident. Yates would much prefer to engage in forward-looking statements or provide numbers with no time references if he has to discuss something semi-realistic.
Financials, hopefully, don't lie. Show me the money.
A very big thank you to Alvie.
Your moderation of this board is appreciated, since you manage to be judicious and even-handed while allowing all points of view to be expressed, while weeding out the occasional overstep (including mine).
Yates blast from the past.
Remember those heady days in mid-2018? Here's what Nick had to say about kiosk production and installation in an interview in July 2018.
"And we have a pipeline in place to deliver up to about 250 units per month at capacity and we think we can be at capacity within the next three months, possibly four. So we would have the ability to then deliver and install very quickly the 1,200 units we have pre-sold in an attempt to recognize the $50 million that’s on our books this fiscal year, and as many future sales that we get, having the ability to deliver them even quicker before the end of the fiscal year and as we progress is the goal for us."
Notice the term he uses - "capacity" - is the same word that he used to describe the 150/month prediction he made for May 2019. As Inigo Montoya said in The Princess Bride - "You keep using that word. I don't think you know what it means."
I know that the list of unfulfilled Nick Yates projections is lengthy, but I was struck by how wrong he was and how similar it sounds to his current prognostications.
Robot rebellion.
This, too, was posted only a few days ago. This is a bit more extreme, but it may be another hard-learned lesson that's been fixed by now.
https://www.reddit.com/r/yesyesyesyesno/comments/bg8948/robot_rebellion/?utm_source=share&utm_medium=ios_app
Robo fail.
This was only posted within the past few days, but I have no idea how old it is. Maybe this is one of the kinks that have been worked out by now.
https://www.reddit.com/r/yesyesyesyesno/comments/bg08p6/froyo_robo/
Riddle me this:
If Nick is projecting that kiosk production will reach 150/month in May, and there are already 250 installed:
1. Doesn't that imply that they will bust through the top end of their estimates for installs of up to 380 kiosks in the current fiscal year? At those rates, they would have installed 550 kiosks by June 30, 2019, eh?
2. That also implies that they will bust through the high end of their predicted number of installs for the 6 months ending December 31, 2019. They gave a range of 600 to 800, but at 150/month, they should reach 900.
3. And that doesn't even take into account the second production line that supposedly will kick in with Stoelting in July.
So, I have to ask:
1. Have things really changed that much for the better in the 14 days between their March 26 announcement and the date of the article suggesting a production rate of 150/month?
2. Why did dear Nick choose to make a forward-looking statement about May kiosk production when he could have (more credibly) provided actual stats for current production in April?
3. While it's clear that Nick intended the reader to get the impression that they WOULD be producing at a 150/month rate, he chose a curious way to express that and may have left himself some wriggle room in the process: "...increased their monthly capacity allowing more than 150 robotic kiosks per month as of May, 2019."
Color me skeptical.
And, as to the fluffiness of the articles, you might note that they are all written by (a) a guy who runs an advertising company that specializes in spreading the word via the web, and that word's mostly about fashion, and (sometimes) (b) a fashion model, and the article you posted is actually identified as sponsored content by the magazine that published it. These are bought and paid for pieces written by non-journalists that have thus far been distributed by lifestyle publications. It doesn't get much fluffier.
Look, new fluffy articles!
Nick Yates is keeping Thomas Herd and his occasional co-author Madison Nagle pretty busy when he's not writing about fashion and she's not busy modeling. Here are a couple of more fluff pieces that were just published on VEND's web site.
http://www.gennextbrands.com/how-generation-next-chairman-nick-yates-disrupted-the-retail-business/
http://www.gennextbrands.com/generation-next-leads-robotic-invasion/
A few interesting quotes:
"... allowing more than 150 robotic kiosks per month as of May, 2019."
Oh, really?
"Here we are now with 250 robotic vending kiosks on the ground in three countries around the globe and another 1100 being built as we speak about to find their way to hungry consumers everywhere!"
Hmmm, 1100 kiosks are "about" to find their way? I suppose that if you're rolling out 150/month in May and accelerating from there.....
And Nick loves the "democratization" brought about by being a public company that allows any investor, with just a few clicks, to invest in "...early stage companies in their growth stage, something that just a few decades ago was the domain of only a select few."