Unique

Michele Corradi of Lindbergh $LDB.MI

Last week I added a new mikro-kap to the portfolio. A unique Italian business called Lindbergh.

Michele Corradi, its co-founder and CEO was very kind and agreed to do an exclusive written interview for you guys. I cannot thank him enough!

In the first section of the interview, Michele covered the key drivers of Lindbergh’s business model. In the second part, for those who have already researched the company, he went into more detail and covered many valuable specifics.

So…without further ado. Here’s the interview;

1.  Michele, for investors not familiar with the company, can you briefly explain what Lindbergh does and what makes you unique?

Lindbergh is a group active in the logistics, MRO (Maintenance, Repair and Operations) and circular economy/waste management sectors. The delivery of spare parts for maintenance workers by 7 a.m. inside their van already represents an almost unique service. We have managed to combine this with a whole series of other services aimed at maximizing the productivity of the technicians, such as waste collection. Offering all these services makes us truly unique.

2. What does a typical transaction/value exchange between you and your customers look like, from start to finish?

Our services maximize the productivity of our customers' technicians, who do not have to waste time on non-value-added activities. Every service we are able to provide at night, while the technician is not productive, allows us to save time and therefore money for our customer. In addition to this, the increasingly strong sensitivity towards environmental issues, including the correct management and traceability of waste, represents a huge strength for us.

3.  How has Lindbergh changed over the past 3-5 years? Can you share some of the most important highlights?

In recent years we have experienced two important steps, aimed at our long-term growth. In 2020 we entered the French market, through a minority stake in a newco. Since September 2021 we have taken full control of the company, with 80% ownership. This allowed us to open a new market, but made by the same international customers who already knew us in Italy. Another fundamental step in our history is represented by the IPO in December 2021.

4. Why did Lindbergh decide to raise money through an IPO rather than a private market financing method (such as private equity or other large investors)?

We chose the IPO to raise money to be used in the first instance in France. The financial and operational situation of the French company was catastrophic. The company was losing around 200k/month. We therefore needed money to cover the losses and to relaunch the business. We raised around 4 million. We also chose the IPO for a question of standing in front of our most important current and potential customers. Furthermore, we have always wanted to maintain full control of our company, and this opportunity is only guaranteed by the IPO. We love to decide independently and remain free in directing the company. We try to communicate in the best possible way to the market, our only and true interlocutor.

5. What are the main differences between the French and the Italian market? Both operationally and competition-wise? What are some hurdles you maybe didn’t anticipate and have yet to overcome?

There are differences between the two countries, not necessarily in favor of one or the other. At the operational level, the model is different. In Italy, all operations are insourced, in France almost everything is outsourced. We have inherited this situation which, in some ways, is a little more flexible. The labor market in France is more complicated than in Italy, so before making decisions to internalize services we must carefully evaluate the economic, service, and organizational impacts. In terms of potential market, France is certainly a huge opportunity. There are many companies, in the most disparate sectors, that have very large networks of technicians. The structure of Italian industry, in almost all sectors, is instead made up of small and medium-sized, very territorial companies with some technicians. In the market, there are some national operators that offer the night delivery service. By applying the Italian business model and therefore starting to offer all the other services (waste as a priority), we will be unique there too.

6.  What steps are you planning to further increase margins in France? Do you think you could ever reach similar margins as you have in Italy? Are you planning to build your own delivery network (hubs) etc. in France to be less reliant on partners?

As I said before, by implementing the waste management service, margins will certainly increase, as has happened in Italy. In addition to this, the entry of new customers and therefore additional volumes will help operations to become more efficient and therefore more profitable. The objective of having the same margins as Italy is very optimistic, but we want to try in the next 2/3 years.

7. Which Italian competitor would you "eliminate" if you had one silver bullet? In France, do you directly compete with Ciblex Express, LM2S, TCS - Sterne Group, or another player? How difficult is it to “steal” each other customers?

In Italy we are unique, we have no real competitors, so I have no one to eliminate. In France, we are already the specialists in this service today. The names you mentioned provide the night in-boot service to some historic customers but within a much larger business. We are not couriers, not because we don't make deliveries, but because we don't think like couriers. We have different objectives and purposes, for us logistics is the means to do something else that helps technicians to be more productive and we want to earn money on this. The courier thinks in euros/shipment, we think in terms of revenue per technician. If customers understand this, they come with us.

8. How do you think about organic growth vs. growth through M&A? What’s the most important criteria you consider before doing an acquisition?

I don't think there is an absolute truth. I have always thought that the basis of business is having long and profitable relationships with customers. And over the years we have grown thanks to this mentality, up-selling and cross-selling. This is why we grow organically every year. We have extreme loyalty among our customers, they know that a healthy relationship with us brings benefits and margins to them too. Growing through external channels (M&A) is an opportunity, which we have taken into consideration, especially after the IPO. The criteria are very simple:

• I buy something that has industrial coherence with our business. I don't buy just to show that I have a bigger "empire"

• I only buy what I can afford to buy, without affecting the financial health of the Group

• I buy if I believe it is the fastest way to enter a new market or a new business

9. What’s the reason for doing (recent) M&A through subsidiaries and leaving a chunk for the minority interests? Won’t it complicate the structure? Why not just buy the entire firm outright? 

Even in this case, I don't think there is a rule that can apply in all situations. Sometimes it is necessary for the selling partner to manage the company directly for a period of time, necessary to better organize the activities. To ensure that this transition is successful, sometimes it is preferable to leave him in the company, perhaps then buying out the other shares with an earn-out after two/three years. Other times there are questions of financial commitment. Acquiring 100% involves a different commitment of resources than purchasing 51%. The important thing is control. What I don't do is come in as a minority shareholder.

10. What other verticals/geographies look interesting to you? Why?

Germany is certainly an interesting market, but also more mature. At the moment we are focused on France and on the development of our industrial plan in Italy. We can also grow a lot in these two markets, and we are doing so.

11. What’s the reasoning behind recent vertical integration and offering technical assistance by yourselves? What kind of margins do you expect?

As I said before, the market in Italy is really very fragmented. There is no national operator recognized by the market that offers technical assistance services in a homogeneous way with a series of unique services and processes behind it. The experiences seen in France also pushed us to consider the idea of integrating these services, and therefore the technicians, within our group. We want to become the first Italian operator in the thermo-hydraulic sector. We also chose this sector to avoid competing in the markets already covered by our customers. These companies already work with good margins, through process optimization and centralized management of the structure we expect further improvement.

12. How much resistance was there from customers when Lindbergh had to raise prices/change contracts last year?

I would say the right resistance, not too much. Customers don't live on Mars, they understood the situation and accepted the price revisions. In France, we are struggling a little more, also because there are no ten-year relationships like in Italy.

13. What are your plans regarding capital allocation for the future? How likely is a return of the dividend?

As I wrote in the last letter to shareholders, from 2024 we will consider returning to dividends. Always compatible with ongoing investments and the financial situation of the Group. I don't promise anything, but we'll definitely talk about it.

14. What’s the most common misconception investors have regarding Lindbergh?

Many investors don't really understand our business model. It is difficult for us to make it understood in a few minutes or through a video of a few seconds. Perhaps they are a bit lazy investors, who don't want to delve deeper and for this reason, perhaps they go where in a minute they focus on the company's market. This is why I love to say that we are unique because through this adjective I believe I can increase interest in Lindbergh.

15. What drives you, Michele? Where do you see Lindbergh in ten years?

When I founded the company in 2006 together with Marco Pomè, we said to ourselves that the company had to be able to survive beyond us, and we are here still working for this. We work every day to build a better place for all the people who share this story with us. The opportunity that Lindbergh has given and will give to these people is the greatest satisfaction of the job I do. All of our management has grown within the company and we are very proud of this. In ten years I see a more solid, more attractive Lindbergh, but with the same values as when we founded it. I honestly see no limits to growth, as long as it is healthy and sustainable.

P.S. (from me) expect a write-up next week.

If this interview piqued your interest (I bet it did)

…and you’re too impatient to wait for my stuff, make sure to read Lindbergh’s prospectus, or better yet, start your research here:

Tikr.com

shameless plug of my go-to investment research tool

Thanks for reading and thank you, Michele!

This is NOT investment advice. All content on this website is for informational and educational purposes only and should not be considered to be advice of any nature. Due your own due diligence.