Enjoy is a pure play on experiential commerce at home. The company partners with premium brands, including Apple, to offer a high-touch retail experience in-the-home at no cost to the consumer. Enjoy expects to go public via a Marquee Raine SPAC (ticker: MRAC) by year end. Loup’s an investor in Enjoy.
The company reported June quarter results, with four takeways:
- Revenue growth of 65% y/y compared to 47% in the March 2021 quarter. While we anticipated growth to step up given the easy comp, it exceeded our expectations. Takeaway: We believe the increase in growth is just beginning, and remain comfortable with our 2021 revenue growth estimate of 82% and 125% in 2022.
- Revenue per visit exit rate of $77 was above the company’s full-year 2021 guidance of $72. Takeaway: This increase is ahead of plan and central to the company hitting Adj. EBITDA profitability in 2023.
- Apple partnership is expanding. Entering the June quarter, Enjoy and Apple were in 3 US markets (LA, San Francisco and Dallas metros) and during the quarter added 5 new markets, expanding to 8 total. The additions include New York, Miami, Chicago, Atlanta, Washington/Baltimore. Takeaway: the Apple relationship is moving forward, and we expect a handful of additional metros to be added by year end.
- Company started cross-partner selling Apple services to other Enjoy partners. This means, for example, that Enjoy can offer Apple services to an AT&T customer. Takeaway: It’s a win, win, win. AT&T gets customers to upgrade to unlimited data, Apple get’s more subscribers, and Enjoy gets additional high-margin revenue.
Apple Partnership Expands
We see the expansion of the Apple relationship as the most important development in the quarter, going from 3 to 8 markets, along with the cross-partner selling agreement. We believe if Enjoy executes, it has the chance to be a core element in Apple’s global, direct strategy, complementing the company’s pillars around online and brick and mortar. We’ve researched Apple for two decades and know there are no guarantees when it comes to long-term partners. For Enjoy to be successful, they’ll have to earn the right to serve Apple customers one market, one visit at a time. Conservatively, we estimate Apple represents a $4B plus opportunity for Enjoy.
Enjoy is a pure play on commerce-at-home opportunity
We see Enjoy as a disruptive idea that offers asymmetric upside, in part because the company has low overhead costs and negligible customer acquisition costs (partner retailers funnel their customers to Enjoy). The company is expected to go public with an initial EV around $1.2B and we believe in two years, fair value will be closer to $2.8B.
Our commerce-at-home thesis
We believe Enjoy fits within a once-in-every 25 year shift in retail. The last one was ecommerce in 2000, preceded by bigbox retailers in the 80s, and shopping malls in the 50s. We believe retail is on the cusp of its next paradigm shift: commerce at home. Specifically, experiential commerce at home. Our thesis is based on three premises:
- Ecommerce is just commerce at home. That’s because almost all retail transactions involve some digital elements. Read more in part 1: Rethinking Ecommerce as Commerce at Home.
- All great retailers focus on convenience or the experiential. Retail succeeds at either end of the spectrum between convenience (speed, selection, self-service) and the experiential (personalized, curated, high-touch). Read more in part 2: Convenience vs. the Experiential.
- There is an open opportunity in experiential commerce at home. The above two premises set up a four-box paradigm to consider, with Amazon, Walmart, and Apple each succeeding in their respective quadrants. This leaves an open opportunity in experiential commerce at home, and we see Enjoy as a pure play on it.
The SPAC Market & Fair Valuation
Investors over the past three months have taken a more cautious approach to SPACs, evidenced by the sell-off in many of the companies that went public earlier in the year. By our math, there is about 140 definitive deals that have been announced, and are expected to go public over the next year. While the cue is stacked, we believe only the best of companies will get public, and Enjoy is one of those companies. In our opinion, fair valuation today should apply a 5.6x revenue multiple on 2022 sales estimates, which yields a $1.4B valuation, versus Enjoy’s current $1.2B valuation. Looking out two years from now, valuation will likely be based on 2024 revenue estimates, which should be around $700m. Applying a 4x revenue multiple to 2024 sales, which is more conservative than the current comp group’s multiple, yields a $2.8B valuation.