Wait, you mean Blackberry don’t sell phones anymore?
Ladies and gentlemen, as we sit back and enjoy Meme season 2.0, I have prepared some due diligence on Blackberry $BB for those who may not be full up to date and familiar with the company. Spoiler alert, Blackberry do not sell smartphones anymore.
Blackberry has suffered a painful decline since the last rally in 2021, but the company has reached an inflection point where the stock as bottomed out, and is primed for an explosive move upwards. The company has transitioned into a Cybersecurity/IOT company, and is insanely undervalued with a market cap of only $1.9bn. Below are some of the highlights of why $BB is an incredible investment opportunity, with the added bonus of meme stock status.
- Solid balance sheet, with $298 Total cash & equivalents https://finance.yahoo.com/quote/BB/balance-sheet
- Expects to be cash flow and adjusted EBITDA positive at the end of this fiscal year. The company has a cost-cutting plan in place and has already executed on $50m worth of annualized cost savings, with a plan to increase annualized net profit by $100m total. https://bwpeople.in/article/blackberry-to-reduce-headcount-in-cost-cutting-drive-509822
https://preview.redd.it/zcr6njyt7e0d1.png?width=557&format=png&auto=webp&s=0da8a78619614a7f40ac20c17e898ccc6d04b91f
- Operating in 2 growing markets, Cybersecurity (TAM growing at CAGR 10.56%) and IOT (TAM growing at 21% CAGR). IOT in particular is the companies crown jewel, where revenue grew 25% YoY with gross margins of 85%
https://www.statista.com/outlook/tmo/cybersecurity/worldwide
https://iot-analytics.com/iot-market-size/
- $815m QNX royalty revenue backlog (and growing). Most recently grew 27% YoY. (Margins on royalties are close to 100%, basically this is like booking net income on the income statement, with no cost of goods sold). Skip to 24:00 in this video where president of the IOT business unit outlines how royalty backlog is a key metric for the IOT business unit. He remarks almost sarcastically and smirks “Very interesting margins, eh, in that backlog”. READ BETWEEN THE LINES PEOPLE
https://youtu.be/KIKs4mYzaFA?si=E3iNgVYaR5887sJL
- Will receive up to $700m in royalties from the sale of their Non-Core IP patents related to their old smartphone business https://www.blackberry.com/us/en/company/newsroom/press-releases/2023/blackberry-announces-new-patent-sale-transaction-with-leading-patent-monetization-company-for-up-to-900-million
- 7 out of 7 G7 governments use Blackberry cybersecurity. 17 of the G20 governments use Blackberry Cybersecurity
https://www.blackberry.com/us/en/company/overview
- Blackberry QNX software is embedded in 24 out of the top 25 global EV automakers (Excluding Tesla). Embedded in 235m+ vehicles and growing at 31% CAGR. Strong foothold in China, the most dominant players in the EV market.
- Partnership with NVIDIA for next generation vehicles. Blackberry QNX is the operating system used for NVIDIA’s DRIVE THOR platform. https://www.blackberry.com/us/en/company/newsroom/press-releases/2023/blackberry-qnx-releases-ultra-scalable-high-performance-compute-ready-operating-system-to-advance-software-development-efforts-for-next-generation-vehicles-and-iot-systems

- Partnership with AWS on Blackberry IVY. Blackberry and AWS have co-developed Blackberry IVY. “BlackBerry IVY is an in-vehicle and cloud connected software solution designed to enable software developers to more efficiently build and deploy data-driven middleware services in the vehicle. BlackBerry IVY abstracts vehicle signals and enables developers to process those signals with code, including with Machine Learning. Car makers and software developers benefit from data connectivity savings, reduced development times, and increased agility without having to make a large upfront software investment”. As Blackberry QNX is already embedded into 235m+ vehicles and growing, BLACKBERRY HAS AN EXCELLENT OPPORTUNITY TO UPSELL IVY to every QNX customer, if it gains traction it opens up a whole new revenue explosive stream for Blackberry. Have you heard of Foxconn? They are the world’s largest manufacturer of electronics, most known for making parts for the iPhone. They created MIH (Mobility in Harmony) who have selected Blackberry IVY to power its Next-Generation Electric Production Vehicles. Other notable early customers are Bosch and Mitsubishi. https://www.blackberry.com/us/en/company/newsroom/press-releases/2024/mobility-in-harmony-consortium-selects-blackberry-ivy-to-power-its-next-generation-electric-production-vehicles
https://pages.awscloud.com/rs/112-TZM-766/images/wp-blackberry-ivy-in-depth.pdf
- Partnership with AMD for Robotics. https://www.blackberry.com/us/en/company/newsroom/press-releases/2024/blackberry-announces-collaboration-with-amd-to-advance-foundational-precision-and-control-for-robotics-industry

So there you have it ladies and gentlemen, who in their right mind would not want to invest in a meme stock that happens to be a tech company in the early growth stage. Let’s all load the fucking boat with shares, and take down every single hedge fund brave enough to short this stock.

ENCYCLOPAEDIA OF CLASSICAL GO PROBLEMS
Volume 1: "Wangyou Qingle Ji" and "Xuanxuan Qijing"
by John Fairbairn
New book by John Fairbairn
You want a book that makes learning life & death go problems fun, that helps you understand and remember all those wrinkles, that makes sense of all those knotty themes, that provides comprehensive solutions at pro level? In short, a book that can be considered definitive?
Well, here it is. This is the first volume of a projected series of problems from the Chinese classics. Japan and Korea often rehashed these works - as did the Chinese themselves, of course - but their main sources were the Chinese editions that go back a millennium.
This definitive volume goes back to the earliest two known collections, the Wangyou Qingle Ji (Carefree & Innocent Pastime Collection) and the truly seminal Xuanxuan Qiqing (Gateway to All Marvels). It thus covers over 500 problems, ranging from superhard to cute. Each one was named. Many are beautiful, difficult, highly practical - or all three - but all are memorable. The names enhance the interest, understanding and memorisation if the problems, while also usually offering a clue to the solutions. The name of every problem is explained here, often in some depth (so giving a unique insight into Chinese history and culture). The fullest possible solutions (over 1,400 solution diagrams) are given on the basis of several centuries of opinions by the most expert players of the time in China, Japan and Korea. Sometimes the professionals differ among themselves! Some problems have over twenty variation diagrams. All known variants of each problem are given. This sometimes means a different solution to each alternative! This, too, promotes deep understanding of the problems.
In addition, all the various themes - around 70 - that occur in the problems (many newly identified here) are listed and explained in the solutions and in an overall thematic index. Not only are problems categorised, but the themes can be seen in order of frequency and thus importance. The combination of names, interesting allusions, and identifiable themes further ensures that reader can truly absorb both the shapes and the dynamic principles inherent in each problem. The large number of variants further allows the reader to understand and remember the wrinkles within each theme.
The modern Chinese characters for each name are given and indexed, and a character-conversion appendix is also provided for those familiar with traditional characters via Japanese or Korean. There is also a very comprehensive general index (10 pages) to the text.
The book is in a large and well illustrated "coffee-table" format of 500 pages, and employs colour. It is the sort of book that graces and justifies that expensive kaya board you invested in.
WYQLJ = 37 problems, 90 solution diagrams
XXQJ = 466 problems, 1,313 solution diagrams
Total = 503 problems, 1,403 solution diagrams
Available worldwide on demand from Amazon/Kindle Publishing from May 2024.
[Note that, in some respects, this book is a paper representation of the e-book Gateway To All Marvels (GTAM), but has been significantly expanded as regards problems, and the Wangyou Qingle Ji section is new. It does, however, exclude the old texts and other GTAM material not relating to the problems.
Volume 2, already approaching the proofreading stage, will present the problems of the Shichi Xianji and Xianji Wuku (both Wood and Leather volumes) in similar exhaustive format. Volume 3 is planned to be the Guanzi Pu.]
Details of many other go books available on www.gogod.co.uk.

Being adaptable is essential in the field of interior design.Furniture that seamlessly combines form and function not only enhances the aesthetic appeal of a space but also maximizes its practicality. When it comes to optimizing both style and utility, grey corner sofa beds emerge as an unbeatable choice. These multifunctional pieces effortlessly marry comfort with convenience, making them an ideal addition to any home decor scheme. Let's delve into why grey corner sofa beds are the epitome of form and function:
1. Space-Saving Solution: In today's increasingly compact living spaces, maximizing every inch of available room is essential. Grey corner sofa beds are ingeniously designed to fit snugly into corners, making them an excellent space-saving solution for smaller apartments or cozy living rooms. By utilizing an often-overlooked area, these sofas optimize space without compromising on style or comfort.
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Grey Corner Sofa Beds
2. Seamless Integration: Grey is a timeless and versatile color that effortlessly complements a wide range of interior styles. Whether your decor aesthetic leans towards minimalist chic, industrial, or Scandinavian-inspired, a grey corner sofa bed seamlessly integrates into any design scheme. Its neutral hue serves as the perfect backdrop for layering complementary colors, textures, and patterns, allowing you to customize your space according to your preferences.
3. Day-to-Night Comfort: One of the standout features of grey corner sofa beds is their dual functionality. By day, they offer ample seating for lounging, socializing, or relaxing with a book. By night, they effortlessly transform into a comfortable sleeping space for overnight guests. This versatility makes them a practical choice for homes with limited guest room space or for those who frequently entertain visitors.
4. Stylish Silhouette: Grey corner sofa beds boast a sleek and contemporary silhouette that adds a touch of sophistication to any room. Their clean lines and tailored upholstery exude modern elegance, making them a statement piece that elevates the overall aesthetic of your living space. Whether you prefer a minimalist design or a more eclectic look, a grey corner sofa bed serves as a stylish focal point that ties the room together.
5. Customizable Comfort: Comfort is paramount when it comes to furniture, and grey corner sofa beds do not disappoint. With options ranging from plush cushions to supportive mattress configurations, you can customize the level of comfort according to your preferences. Additionally, features like adjustable backrests or built-in storage compartments enhance the functionality of these sofas, ensuring that they meet your specific needs and lifestyle.
6. Durability and Easy Maintenance: Grey corner sofa beds crafted from high-quality materials are not only stylish but also durable and easy to maintain. Opt for fabrics that are stain-resistant and easy to clean, ensuring that your sofa bed retains its pristine appearance for years to come. Regular vacuuming and occasional spot cleaning are typically all that's needed to keep your grey corner sofa bed looking as good as new.
7. Versatile Design Options: Grey corner sofa beds come in a variety of designs to suit different preferences and spatial requirements. Whether you prefer a sectional sofa with a pull-out bed, a convertible sofa bed with a chaise lounge, or a modular sofa bed with customizable configurations, there's a grey corner sofa bed to fit your needs. Additionally, accessories like accent pillows, throws, and area rugs allow you to personalize your sofa bed to reflect your unique style and personality.
Grey corner sofa beds are the epitome of form and function, offering a perfect balance of style, comfort, and practicality for any home decor. From their space-saving design and seamless integration into various design schemes to their day-to-night versatility and customizable comfort, these multifunctional pieces elevate the aesthetic appeal and functionality of any living space. Whether you're outfitting a small apartment, creating a cozy guest room, or upgrading your living room, a grey corner sofa bed is a stylish and practical investment that enhances your home decor in more ways than one.

🎉 Exciting News Alert! 🎉
We are thrilled to announce that Skywinds Solutions has been ranked 7th among the Top IoT Companies on Clutch.co! 🌟
This recognition reflects our commitment to excellence in IoT and our dedication to delivering innovative solutions to our clients. We are incredibly grateful to our fantastic team for their hard work and expertise and our client's trust and support.
Thank you to Clutch for this honor and everyone who has been a part of our journey. We look forward to continuing to drive innovation and positively impacting the IoT space.
https://clutch.co/in/developers/internet-of-things/ahmedabad?page=1
https://preview.redd.it/xfmf9qiwld0d1.png?width=4500&format=png&auto=webp&s=abe5377d0bb64439cae734d7628054dd8de7da4f

New Release: Envio Version 1.0.1
We're thrilled to announce the launch of our v1.0.1! This marks a significant milestone as we've achieved all our MVP target features and more.
https://docs.envio.dev/docs/getting-started
https://preview.redd.it/fwv7d4pufd0d1.png?width=2905&format=png&auto=webp&s=8f13452c6ede816ec24ec392d4ca449a079f7f35
Moving forward, our releases will adhere to the SemVer standard. Expect fixes in patches, new features in minor releases, and any breaking changes or major features in subsequent major versions.
Changes: New features: • Rollback support for re-orgs • Implementation of a "deleteUnsafe" method for entities
Fixes: • Corrected wrong sync time displayed in the TUI and on the hosted service • Fixed error logs printing as an empty object
Rollback On Reorg: The Rollback on Reorg feature is currently opt-in. While we've conducted extensive dev testing, we'll conduct production tests before enabling it by default.
To try this feature, please set the following flag in your config.yaml:
https://preview.redd.it/fssjubz4gd0d1.png?width=418&format=png&auto=webp&s=60e0f8dd52a2ec8c3ed174e85cdb85ecaef92522
You can also manually configure the confirmed_block_threshold for a specific network:
https://preview.redd.it/h0ujvth6gd0d1.png?width=622&format=png&auto=webp&s=5750a4a3800eab503c09d1d36422c4f7a36da8cc
This threshold defines the number of blocks below the chain head where a block is considered "confirmed" and should not be subject to a reorg. Reorgs beyond this point won't trigger a rollback.
Currently, all chains default to a threshold of 200 blocks, but this number will be tailored per chain in future releases.
Important notes regarding rollbacks and reorgs:
• Reorg detection is guaranteed when indexing from a HyperSync endpoint. However, custom RPC endpoints may have edge cases where reorgs can occur undetected.
•All entities defined in your schema and set/read in your handlers will be managed and rolled back in the event of a reorg. However, any additional side effects or caching used in your handlers cannot be accounted for.
DeleteUnsafe:
We've named this method "deleteUnsafe" as it provides a simple implementation of delete without managing cascading for you. In an indexer with a schema like:
https://preview.redd.it/o8adt0cbgd0d1.png?width=568&format=png&auto=webp&s=04f60a75ec3a2b96decd57c47ce00743cb0b50d1
When executing the following code in a handler:
https://preview.redd.it/1gtrxpocgd0d1.png?width=816&format=png&auto=webp&s=be9ea6f68bad31b4af0fbcde2cf7502192c3b6b5
Please note that the entity B linked at the field linked_b will NOT be deleted automatically and must be done manually.

The kitchen is on fire. Welcome to the final part of the Vapiano story where the tables are turning. In the first two episodes we followed Mark Korzilius' journey from setbacks to founding Vapiano, a groundbreaking restaurant concept, highlighting its fresh ingredients, dynamic atmosphere, and data-driven operations that drove rapid success. While achieving initial profitability and garnering attention from industry giants like McDonald's, Vapiano's global expansion has led to stellar revenue growth. However, it has also resulted in the emergence of numerous side projects (or distractions), operational challenges, increased costs, significant investments, and a notable accumulation of debt. This underscores the prioritization of top-line growth over profitable growth. We will continue on this thread and see how the story ends, but I would encourage you to read part one and two for better context. Vapiano P1: Italian Food Made in Germany (substack.com). Let's dig in.
Before Going Public
We are now in 2015 and the year is a disaster for Vapiano's PR department. Employee time stamps are being manipulated, endless overtime for employees and high turnover in managerial roles are reported; mice in the kitchen and even rotten food allegedly found.
The company is confronted with allegations of exceeding working hours among trainees in an article published by Welt am Sonntag, while the same outlet accuses Vapiano of manipulating punch times. The auditing firm PwC is commissioned to investigate the allegations and finds that there is no systematic approach but rather misconduct by individual employees, a mistake that’s being corrected. Internal however, investigations into stamp times are carried out regularly now and beyond its obvious reputational impact, this sucks up valuable management time and attention.
In the summer of 2015 CEO, co-founder and investor Gregor Gerlach, who has been running the group since 2011 is stepping down and Jochen Halfmann is taking over. A new Vapiano People Program with an App is being developed with the aim to better interact with customers that will incorporate innovate features such as mobile pay. The German website sees a launch of new magazine to further promote the brand and there is now a full inhouse blogger and Instagram team being installed. In October the company buys seven restaurants from original co-founder, former co-investor and ex-president previously responsible for internation expansion Kent Hahne (2x Bonn, 3x Cologne, 1x Koblenz and one in Cologne that’s under construction). This package of Vapiano restaurants is very successful and generates net sales of more than 20 million euros in 2014. Hahne opened his first Vapiano restaurant in Cologne in August 2006 and in 2015 with his company apeiron AG, Hahne operates six L'Osteria franchise restaurants, a direct Vapiano competitor, and two self-owned restaurants GinYuu.
Then in November of 2015, the next public relations bomb goes off with allegations regarding the company's quality standards. The company immediately investigates the issue through internal and external specialists but finds no evidence of any quality issues. Nevertheless, knowing that the group is now being closely watched, the company’s already in place hygiene standards are being reinforced. Additional audits and inspections are performed nationally. Further, all Vapianos worldwide are being audited twice by the partners SGS Institut Fresenius and SAI Global. Auditing software is purchased to simplify the implementation of the audits and the resulting measures. Apart from the external examinations, there is a food sampling plan in place being performed continuously. Again, all of this sucks up costs, management time and attention. With all these tumultuous developments the company’s growth engine is undeterred. Revenue grows by a whopping 50 million euros to 202 million euros, an increase of 33%. Impressive. While average spent per customer increases in all countries, the number of customers per day in Germany decreases by 3.3% partially due to the negative press towards the end of the year. Five own, four JV and 19 new franchise restaurants are added that year to the group, the total number of own managed restaurants grows to 51, there are 31 JVs and 84 franchises which bringing the total to 166 Vapiano restaurants. Global restaurant sales are now above 400 million euros.
But while revenue grows by an astronomical 50 million euros, operating profits, alarmingly, shrink again. Gross margins are staying perfectly healthy above 75% but operating costs keep growing disproportionately fast. The Company’s outstanding debt jumps by almost 30 million, close to 85 million euros by the end of the year. With operating profits at 9.5 million euros, alarm bells should be going off right now.
In Q4 of 2015, new CEO Jochen Halfmann introduces Strategy 2020. The new strategy includes five essential points. One, profitable growth in the newly defined core markets of Germany and Austria as well as in the UK, Netherlands, France and USA. Two, operational excellence through strict “best practice” management. Three, further development and digitalization of the concept considering guest feedback. Four, greater focus on long-term employee retention and five, building a modern and sustainable IT landscape. Sound’s good on paper but let’s see how things pan out.
Vapiano's investments (capital expenditures) that year are primarily directed towards new restaurant openings, renovations of existing establishments, and share acquisitions in other Vapiano restaurants from franchisees or JV partners. A significant portion of funds is allocated to the digitalization of the guest experience, including the development of a new app scheduled for market release in 2016 and the implementation of a time recording system across all group restaurants. The world's first standalone Vapiano restaurant with a delivery service that year is built in Fürth, Germany. The company keeps expanding its presence in both inner-city locations and international markets, such as Shanghai, China.
To finance all of this, the group has its own operating cash flow which comes in at 18 million while capital expenditures are 26 million euros plus 14 million for acquisitions. The funding gab is filled with 26 million euros of new debt and a seven-million-euro equity raise. At that end of the year and after the equity raise Gregor Gerlach (through his AP Leipzig GmbH & Co. KG entity) holds 30.1%, Hans-Joachim and Gisa Sander through their Exchange Bio GmbH hold 25.5% and the Tchibo heirs, Herz through their Mayfair Beteiligungsfonds II GmbH & Co. KG hold 44,4%.
But for the first time the restaurant’s concept that was so successful to date is being questioned. Some customers are starting to mislike the operational flow of the concept itself. If you want pasta, you must queue for pasta. If you want pizza you stand in a different queue. A small side salad, yet another queue. "You spend more time carrying trays than an actress in Berlin-Mitte. The audience in the pasta limbo can only consist of people who have worked for an insurance company for a long time and, like Stockholm syndrome, they can no longer get away from the industrial canteen feeling," writes TV host Beisenherz provocatively. While overly harsh in his assessment he's not entirely wrong judging by customers venting their frustrations in forums and social media channels. It isn’t uncommon for those who ordered pizza to have already finished eating while there is little movement in the pasta queue. Long term that doesn't go down well, QSRs competitors like L’Osteria are handling this process differently, with much success.
https://preview.redd.it/6cas01oked0d1.png?width=1200&format=png&auto=webp&s=2da6e0b4bc0e07dbee558de412feb414cd598d4a

Tipping Point

Where are now in the year 2016 and things start to deteriorate visibility. Perhaps not for the leman’s eye but any business minded observer can see that there are problems under the hood. Yes, revenue grows yet another whopping 50 million to almost 250 million euros but half of that growth, comes from acquisitions of restaurants that the group didn’t already own 100%, which is now being fully consolidated within the group’s accounts. Here is a concrete example. In the past, Vapiano SE, the group’s top holding company held an indirect 50% stake in a French subgroup via the subsidiary VAP Restaurants SA, based in Luxembourg, and included this as an associated company in the Vapiano SE consolidated financial statements using the equity method. Due to the acquisition of additional shares in September of 2016, Vapiano SE's indirect share in the French subgroup increased to 75%. This means that Vapiano SE takes control of the French subgroup, which is therefore included in the group’s financial statements as part of the full consolidation. The revenue from the acquired subsidiary now recorded in the consolidated income statement amounts to 12.8 million euros. While that’s great for the top line, the loss of the fully consolidated entity equates to 0.2 million euros. Yes, you are buying revenue, but there are losses attached to them, not profits. A similar case is the Swedish entity that runs eight restaurants with revenue of 11.5 million euros but has losses of 235 thousand euros. So much for Strategy 2020 and “profitable” growth.
That year the group’s operating profits are absolutely tanking, halving to 3.5 million euros. Operating profits are now a mere 1,4% of revenue. Remember original founder Mark Korzilius who talked about operating margins of 25% to 28% at the restaurant level? Yes, there are overhead costs for the organization that sits above the chain of restaurants, but operating margins that low indicates a course correction is needed. What’s telling is that in the annual report, in the management discussion section, the company starts talking about EBITDA as a proxy measure of profitability, rather than operating profit or net income. This wasn’t the case in the years before. Is this window dressing for an upcoming IPO? EBITDA is short for earnings before interest, tax, depreciation, and amortization. How can you measure profitability of a restaurant chain that absolutely and unequivocally needs capital investment to maintain its restaurant operations, the very source of cash generation, by simply excluding this maintenance charge (depreciation in the income statement)? Vapiano’s own annual report talks about the fact that existing restaurants must be rejuvenated from time to time and that new interior designs have to be implemented every few years. These things wear and tear, they go out of style, kitchen equipment breaks and needs replacement. This business absolutely needs maintenance capital expenditure, why anyone talks of profits before these maintenance costs is beyond me. Fun fact: in the previous annual report EBITDA is mentioned seven times, mostly around restaurant acquisitions and financing, not however as a profit indication for the group. In the new annual report, EBITDA is mentioned 28 times. Maybe it’s just me but belated Charlie Munger liked to call EBITDA: bullsh*t earnings. When in doubt I stick with Charlie. Interestingly, EBITDA for Vapiano keeps growing while operating and net profits keep falling.
Operating cashflow for the group that year is about 21 million euros, but capital expenditure is 30 million and acquisitions for subsidiaries another 20 million. To finance these expenditures another 28 million euros of debt and 16 million of equity is raised. Net debt rises above 130 million euro. The operating cashflow of the group before any capital expenditures is 21 million euros. I am not sure free cash flow would be significantly positive after maintenance capex is paid out; it’s not broken out so we can’t be sure. Granted, I am not on the ground during this time, and I am not in the board room, I am simply reading what’s in front of me, but to me this is starting to look like a distressed situation. Regardless, the following year the company goes public.

IPO

Where are now in the year 2017 and its Vapiano’s first year as public company. The company’s annual report reads the following “Sales revenue, like-for-like growth (LfL) and the earnings figures EBITDA and adjusted EBITDA are used as the most important financial performance indicators for controlling operational business activities.” The very same report however also says: “The majority of the group's investments regularly go towards opening new restaurant locations and modernizing existing restaurants. The latter are differentiated into regular replacement investments that occur during ongoing operations (Maintenance CAPEX) and fundamental investments in the renovation of a restaurant (Remodeling CAPEX). On average, a restaurant remodeling takes place nine years after opening.” It says it right there in their own report; every nine years a remodeling is taking place. Remodeling and updating is not cost free, so why exclude depreciation charges which reflect capital expenditures? I understand that perhaps you would want to strip out one-off opening costs, that’s fine and fair, but don’t go overboard.
The number of restaurants increases by 26 (previous year: 13) to a total of 205. The increase consists of 27 new openings and one closure. Group revenue grows to an astonishing 325 million euros but here comes the shocker, operating profits turn negative to 25 million. Fine, strip out foreign exchange losses of 3 million, IPO costs of 5.8 million and new opening costs of 6.1 million and you still have 10 million euros of operational losses. All the while the debt load of almost 130 million hasn’t materially changed, so those operating losses are before a six-million-euro interest payment. 184 million euros are raised through the IPO of which 85 million go to the company. This money is earmarked for further expansion as the group has ambitions to almost double the footprint to 330 restaurants by the end of 2020. The company is currently not profitable on an operating basis, and still wants to expand aggressively? I don’t get it. The remaining 100 million euros of the IPO money raised is distributed to co-founder Gregor Gerlach and Wella heirs Hans-Joachim and Gisa Sander. The family office of the former Tchibo owners Günter and Daniela Herz with a 44% stake, don’t sell a single share. After the IPO, 32% of all the company’s shares are now in free float.
One year later, in 2018, things get even worse. Revenue grows to 371 million, but operating losses mount to 85 million euros, that’s before interest expenses of 9 million. Even the beloved EBITDA figure turns negative, meaning the operating business before any expansionary or even maintenance capital expenditures is loss making. All regions are experiencing significant deterioration in their earnings profiles. Like for like sales are down 1% across the board. That’s revenue, not profitability. The question naturally arises: is the Group approaching its natural saturation point here or this operational by nature? The operating cash flow is now 9 million while financing cost are close to 7 million. That leaves 2 million for maintenance capital for 74 own restaurants and 76 joint ventures ones. Describing this as financially tight, would be an understatement.
Things are not looking good at this point. Yet the company still grows restaurants by 26 new sites. 64 million euros are spent on acquisitions, new openings, and maintenance costs, financed through a 20 million-euro equity raise and 72 million of new debt. The Company now has net debt outstanding of over 160 million euros. After the equity raise and by the end of the year 2018, Mayfair owns 47.4%, VAP Leipzig, Gregor Gerlach’s entity owns 18.9% and the Sander couple own 15.5% of the company. Yes, the Sanders and Gerlach may have taken 100 million euros off the table, but they still have substantial skin in the game. Plus, Mayfair hasn’t sold a single share and instead injects more money into the company through the equity round. The stock has now fallen from its IPO price of 23 euros per share to under 6 euros by the end of 2018. Something must be done here. And indeed, there is pivot in strategy and a hard push for change. At last, the management team abandons its aggressive growth plan and curtails new openings significantly. Additionally, the team wants to run a thorough analysis of weak locations to then either discontinue or sell sites. In Europe, the operating focus will be put on corporate restaurants and joint ventures in major cities to ensure the ideal size and location to match the respective demographic target group. Outside of Europe, the franchising business is being expanded and at the same time a consolidation of the existing corporate and joint venture markets is being sought. All future investments will be reviewed to achieve higher rates of returns on new openings. Investments are also being made in the renovation of older restaurants. The goal in the future is to also open smaller formats, like Mini-Vapianos (less than 400 square meters) or Freestander at prominent transportation hubs outside city centers (currently in Fürth and Toulouse) to cater to individual location requirements, and to enter new partnerships. I am not sure why management hasn’t stopped all expansion altogether, bringing the ship in order first, getting profitable, clean up, all hands-on deck before considering any further expansions whatsoever. But again, it’s easy to comment from the sidelines; maybe they saw white spaces that would be covered by competing concepts if they weren’t moving fast and aggressively enough. Although pushing internationally means competing with local players such as Jamie's Italian, Prezzo, Pizza Express, Wagamama, Nando's and many more which brings in its own dynamic.
Management also aims to enhance guest satisfaction. This involves refining operational processes, reorganizing the support center, and refocusing on the core offering: providing fresh and high-quality Italian food at affordable prices for a broad audience. The group also aims to reduce waiting times, especially during lunch, while also improving the evening atmosphere. There is even what I would call an evolution, away from Vapiano’s original concept, reorientating the customer journey. The ordering flow is being changed, offering guests synchronized preparations of all dishes while eliminating wait times at the cooking stations. The open show kitchen remains, staying true to original mantra of freshness and transparency but now guests can choose their preferred method of ordering through a mobile app, using a digital order point (kiosk), or by personally placing an order with a waiter. Guests can still freely choose their table and are then informed about the complete preparation of their order through a pager or their smartphone. This is a substantial deviation from the original concept, but a needed one. The group is also exploring and implementing the expansion of take-away and home delivery services but only at suitable locations, not universally across new openings. I am not sure why home delivery is even a priority here; it adds operational complexity. It’s better to clean up shop first and get back to the basics before adding new complexities. To be fair management does try to simplify. There are 49 different permanent dishes on the menu and additional 10 seasonal ones. Customers can choose from eleven different types of pasta. There is simply too much choice, and it makes orders complicated. The company announced to slim the menu down to its most popular and typical Vapiano dishes. There’s no need for an Asian salad at an Italian restaurant. "We have to go back to the roots, i.e. classic, honest Italian cuisine" says COO Everke. Regardless, in November of 2018, the supervisory board pulls the plug on CEO Jochen Halfmann and replaces him with Cornelius Everke. Everke himself has just become COO five months ago. Since 2017 he was responsible for international expansion. From 2011 to 2017 that role was filled by Mario Bauer – put a pin in that name, he’ll play a key role in the groups fate later. Then nine months later, in the middle of 2019, Cornelius Everke quits. He essentially concludes that his skillset and experience in the areas of internation expansion is no longer needed in the foreseeable future. To put it differently: Vapiano has moved from a growth story and has become a restructuring case, and other skills are required for that job. In June of 2019 Everke says the following “(we’ve) made a bit of a mistake when it came to foreign expansion”. No sh#t. Vapiano postpones the presentation of the 2018 annual financial statements three times in the spring of 2019, citing negotiations over an urgently needed loan of 30 million euros. It’s not until the end of May that a binding loan commitment comes through from the financing banks and major shareholders.
We are now in August of 2019 and the corona pandemic is just around the corner. Supervisory board chief Vanessa Hall takes over as interim-CEO and things are unravelling. Visitor numbers are declining; originally, it was planned to sell the US business but halfway through the year the buyer cannot come up with the money. But not all restaurants are performing poorly. The group's poor figures contrast starkly as an example with the experiences of the Swiss-German franchisee, who runs six restaurants. The Sodano family in Switzerland pays Vapiano a royalty of 6% of sales for the use of the brand. Enrico Sodano explains in an interview that they operate largely autonomously from the licensor. If an “accident” were to occur, he could immediately replace the Vapiano sign with Sodano, he says. The family concluded the rents and contracts with employees and suppliers independently. The Sodano family have six locations in Bern, Basel and Zurich, around one million guests every year and 350 employees. Things are going well on the ground. The delivery service they’ve built is offering them a second income stream. Expansion into Winterthur, St. Gallen and Lucerne are being planned; small locations with 150 to 250 square meters and an attached delivery service. Originally, Vapiano restaurants used to be huge but for such a large restaurant to be profitable, 800 to 1,000 guests per day are needed. That’s possible in medium-sized cities, but not in smaller towns which is why the Vapiano group now also supports smaller formats. Back to our corporate drama. The 2019 annual report would be the last report the group files. By the end 2019 the outstanding debt of the company is at an astronomical 450 million euros. Revenue has grown by another 7%, produced by four net new openings through two JVs and two franchise restaurants but operating losses come in at 317 million euros. That sound like an absolute shocker at first but depreciation and amortization charges are 345 million, so that operating cash flow is actually positive but unfortunately capital expenditures and interest payments are so large that they are eating up all of the company’s operating cash flow. Then in the beginning of 2020 Corona hits with full force and the world shuts down. As a result of the measures to prevent further spreading of the virus, the group is forced to cease all global business operations (except in Sweden). While all these shutdowns are happening, the group is the middle of negotiating with its lending banks and main shareholders. There are additional financing needs for restructuring measures, even without a pandemic happening in the background. The situation is so dire that the company starts pleading to the German government to roll out the package of financial help more quickly. Unfortunately, it’s to no end. The rapid closure of restaurants and the resulting lack of operating cash inflows in conjunction with the additional financing requirements, lead to the company’s final knockout punch. In April of 2020, the Vapiano group officially files for insolvency proceedings. The end of an era.

New Beginnings

Because of the pandemic, the majority of the group's subsidiaries in Austria, the Netherlands, Denmark, the United States, Sweden, and China also file for insolvency or seek liquidation. The US business never gets sold in the end and is wound down. In the summer of 2020, significant group divestments occur, including the sale of 75% shares in the group's French subsidiaries, shares in franchisor companies, Australian subsidiaries, German subsidiaries, associated companies, self-managed restaurants in Germany, and insolvency-related sales in the Netherlands, Great Britain, and Sweden. The buyer of the Vapiano brand and one of these bundles of Vapiano restaurants is company named Love & Food Restaurant Holding, a consortium led by Mario C. Bauer – a name I told you to remember. Bauer was a former Vapiano board member and led the national and international expansion, opening 200 sites in 33 countries from 2011 to 2017 until he was succeeded by Cornelius Everke. Bauer didn’t feel comfortable with the IPO at the time but clearly has a lot of managerial and entrepreneurial talent.
The buyer consortium is an absolute A-Team comprised of European QSR top league hitters, including the founder of the Pret A Manger chain Sinclair Beecham; Henry McGovern, the founder and Ex-CEO of the giant international restaurant and foodservice operator AmRest; the Van der Valk Family that runs hotels and Vapiano restaurants in the Netherlands, and co-founder and ex-CEO Gregor Gerlach. The acquisition value is 15 million euros and entails 30 Vapiano restaurants in Germany, albeit that’s just the purchase price which comes on top of any capital investment needed to refresh and return the sites to its former glory. Nevertheless, just as a thought experiment, if you can get each site to 2 million euros of revenue and 400,000 euros in operating profit on average, which wouldn’t be an overly aggressively assumption given the company’s history, you’ve got yourself a package that can deliver restaurant-level operating profits of 12 million euros or more. It’s not disclosed how much capex was needed to refresh the operations, just that fact that the overall investment plus purchase price was a middle double-digit million-euro figure. Stil, it probably was a decent purchase. The same consortium buys Vapiano’s French business for 25 million euros just two weeks prior. After the transaction concludes, the master franchise is given to Delf Neumann and his Gastro & Soul GmbH. Neumann is an experienced operator, and he is ambitious to revitalise the brand with new services and products. For example, instead of pizza, the restaurants will be serving pinsa - a flatbread made from sourdough, wheat and rice flour, topped similarly to a pizza. It targets a more health-oriented customer base looking for a less calory heavy option. The menu overall is expanded by including a variety of vegan and vegetarian dishes.
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Today Neumann’s Gastro & Soul GmbH operates 18 Vapianos on its own account and has 29 franchise sites, amongst other brands. By the year 2021, Vapiano operates 191 restaurants in 34 countries. This is around 50 fewer sites than before the bankruptcy. The number of branches is particularly thinned out in Germany – from 80 to 55. Nevertheless, Vapiano's home country remains by far the largest market, followed by France with 35 restaurants and Austria with 15 locations. “We have shrunk ourselves to health,” says Bauer in the aftermath and there is no further shrinking planned. Quite the opposite, the smell of expansion is in the air again – pun intended. Not as aggressively as before and with a new menu and ordering process.
Overall, the team around Bauer is filled with industry experts with knowledge and networks gained over decades who have a great track record, a long-term view, and the staying power to let Vapiano breath and finds its way back to success. The pressure of being a public company with all the associated quarterly, half-year and yearly disincentives have been removed. The menu is changed and extended with new types of pasta and sauces with significantly more vegetarian and vegan dishes available. Guests can order with restaurant staff, at terminals or on their phones and there are barcodes attached to the tables identify the respective seat. The food is brought to your table, all at the same time if you are in a group, no more annoyances with waiting in line. There is a plan for smaller, 350 square meter locations, with half the number of guests and significantly fewer staff and less set-up costs required to make the economics work. Locations that capitalize on remote work and increased demand for local lunch options, higher population density with shorter delivery routes and therefore cost-effective in house delivery services are targeted. And Bauer is testing the concept of ghost kitchens, which operate without a dining room or service staff, focusing solely on preparing food for delivery services, which for obvious reasons have a very different operational set up and footprint. Original founder Mark Korzilius however is not entirely convinced. He is not a fan of the pinsa for instance and he considers Vapiano's pizza as its cash cow, flagship product and believes that the core Vapiano proposition of Pizza, Pasta, Bar that has given the company its original success is being diluted. He instead admires the competitor L'Osteria, saying they’ve done a better job by focusing on Italian classics, especially the impressively large pizzas that sticks out beyond the plate is leaving every customer in awe. The guys who run L’Osteria are the same guys who have built Vapiano with him in the first place. Bauer on the other hand, like a true business leader, remains undeterred, stating that he is frequently asked whether Vapiano's restart was bold or foolish. He believes in entrepreneurship, franchising, in his experienced fellow partners and importantly the Vapiano concept. By the year 2024 you can find over 140 Vapiano branded restaurant in 27 countries across the globe, including locations far away from its birthplace like Australia, USA, Columbia, Chile, Bahrain, and Saudi Arabia. And why not? Italian food is, and will remain to be, incredibly popular. Vapiano offers fresh and tasty food at affordable prices in a good atmosphere. This combination of attributes should attract a lot of customers. It certainly has in the past.
For more stories: WIP Thomas Weitzendoerfer Substack