It is a typical example of how B2C companies interpret their own results.

But this is an example of extremely bad/misleading financial modelling which has also been typical with B2C IPOs/IR...so it doesn't really reflect how they make money...because they aren't actually making any money doing this.

There are, to be frank, so many errors that it would take multiple blog posts to go through...some classics from one read through:

* "Product ROI - Revenue" - this will go down for me as a real DTC classic...I had to check if the CFO perhaps did stand-up comedy on the side, this is surely indicative of great comedic talent? But no, just a neck made of solid brass.

* "Product ROI - Profit" - after deducting almost no costs. Again, if this company doesn't work out then the executive team should surely consider comedy.

* The big issue with all these analyses is that they are very sensitive to the recent past. You are not getting a random sample of history, you are getting the sample where everything works out, and all the metrics (whether fictional or not) produce the right outcomes. That is fine, but it is worth understanding that over the long-term, it will go wrong eventually and the estimate for turn will drop significantly. So whatever number they produce sounds great but it is best case. You see this over and over (turn, churn...it is usually some measure like this that is clearly very favourable and unrepresentative).

* With this company specifically, another big problem is that management controls D&A...they are saying clothes will last three years...okay...my feeling here is extreme doubt. Burberry used to literally set fire to clothes that were more than a year old...my view is that management have (somehow they convinced their auditor to go along with this) turned an immediate business cost into something they can depreciate over three years so their "financial model" doesn't look like total dog shit. Btw, you can actually back this out, I am not going to bother because I can see the "model" is unprofitable once you do this...obviously.

* If I was inclined to analyse this business (I am not, it looks like a dumpster fire), I would need to really interrogate the claim of 20 turns per unit and exactly when those turns are occurring. I could be convinced this model works. But if management is depreciating over three years...all I am clear of is that management are up to something.

* No deduction of marketing costs in ROI calculation? They have gone for "Product ROI"...okay but the business model depends very heavily on efficiency of marketing spend. I understand what the game is with IPOs but is this a real example of their "financial model"? No, it is fictional.

* Their G&A is crazy. I don't know how this is possible (the other thing I would look carefully at would be their Linkedin, it is so large that one wonders if costs aren't also being moved here from somewhere else)...again, I understand why this isn't "Product ROI"...but they are spending huge amounts here, which really should be taken into account in any analysis.

* Fulfilment is part of the model but I didn't see a real explanation for that cost. They are obviously having to clean/repair clothes but where are they in their capital cycle (this is very important for DTC because it is something the market frequently gets wrong)? It looks to me like they invested heavily pre-Covid, haven't really seen things recover...so I would guess they lever costs quite quickly on fulfilment when they recover (which is good: simply, their cap utilization is probably low so revenue can go much higher with little marginal costs...I do wonder why the selling shareholders are so generous) but, again, I would question the value of their inventory...and if they don't recover then those fulfilment costs can sink them too.

Yep...so I would be cautious about reading too much into this. The stuff about "Product ROI - Revenue" and depreciation are real classics though...when you think you have seen it all, the investment bankers will continue to give (I have no idea how they got KPMG to sign off on their depreciation policy). Very generous.

EDIT: would love to see more two years financials too...like that is highly, highly, highly sus...is that just the norm now (I don't do this kind of thing professionally anymore). You have to look at cash flow with these businesses to see "real" profitability, and capital is just pouring into the business with very little in the way of return...it just makes me wonder whether they weren't also losing tons of money in 2019, and realise that no-one will buy the Covid turnaround tale if they were also losing crazy money in 2019. I notice that one of the first search terms for the company name on Google is "...are they still in business?"...which isn't encouraging.