Sweetwater Borrower LLC

Overview Key strengths Key risks Second largest market share in the niche musical retail industry. High financial leverage and financial-sponsor ownership. Good brand recognition among professional musicians. Limited geographic footprint and lean product diversity. Participation in the mature and highly competitive musical instrument retail industry. Sweetwater Borrower LLC improved its operating performance in 2021 with revenue growth of about 25% at $1.4 billion for the fiscal year, supported by high-single-digit percentage growth from consumer acquisition and scaling of sales force, aided by positive COVID-19 pandemic-induced trends for the industry. Sweetwater also benefitted from the return of sales related to live events that were absent during the height of the pandemic. We anticipate low-single-digit percentage revenue growth in 2022 and that

...We expect revenue growth to moderate in 2022 despite strong performance in 2021. Sweetwater Borrower LLC improved its operating performance in 2021 with revenue growth of about 25% at $1.4 billion for the fiscal year, supported by high-single-digit percentage growth from consumer acquisition and scaling of sales force, aided by positive COVID-19 pandemic-induced trends for the industry. Sweetwater also benefitted from the return of sales related to live events that were absent during the height of the pandemic. We anticipate low-single-digit percentage revenue growth in 2022 and that these trends will normalize. The company's profit margins lag those of peers, with S&P Global Ratings-adjusted EBITDA margins in the 6.6% area, making cost management a key factor for operating performance improvement. We believe Sweetwater's margin profile is in part driven by the pricing arrangements with manufacturers and the competitive environment. We expect some margin compression given the...

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