Skullcandy CEO Jeremy Andrus has been on a whirlwind tour that began with a trip to Kandahar, Afghanistan before a three week investor road show, climaxing with his company’s debut on the NASDAQ on July 20. Since that point, Andrus has been splitting his time between Skullcandy’s San Clemente, California and Park City, Utah offices, a great foundation for his surfing and snowboarding, to coordinate with his team and build on their global growth strategies.
Andrus, who has lived all over the world including the East Coast, California, the Midwest, UK, and Italy, joined Skullcandy in 2004 after getting an undergrad at BYU and an MBA at Harvard, and has helped grow the brand since it was a fledgling sub-million dollar company.
After nearly seven months of radio silence surrounding Skullcandy’s IPO period, we had a chance to catch up with CEO Jeremy Andrus by phone from his Park City, Utah office and discuss the IPO process, its lessons, Founder Rick Alden’s resignation as CEO, and the brand’s post-IPO goals.
As a Harvard MBA, what brought you to Skullcandy and got you involved with Rick and the brand?
At the time I was living in San Francisco working for Kimpton Hotels. I was doing strategic planning and real estate finance. I loved the company and product, but I was at a moment in my career where I was feeling a bit bored. I got a call from a buddy back in DC, and he left a voicemail telling me to check out this company called Skullcandy, he thought they had a lot of potential.
I’m thinking “Skullcandy? That’s not really where I see my career going. A candy company?” I was envisioning Halloween and chocolate skulls. This was back in 2004 and the company was tiny at the time. I checked out the Website and it had a pretty cool vibe. I came out to Park City and went riding the next weekend and met some of the guys and left thinking, “what a cool brand.” It wasn’t really in my career path though, I didn’t have a background in electronics, hadn’t spent time in China, but it just felt like one of those opportunities to chase something that was more exciting than what I was doing.
A couple weeks later I packed the Ford Explorer and moved into my parent’s basement in Park City, Utah.
Rick definitely had an amazing vision, I’m sure it was super fun to be part of it on the front end.
It really was. Rick is a great entrepreneur. We wouldn’t be here today, not only for his vision, but entrepreneurs are really important in driving the culture and the brand.
It’s funny, when I saw my buddies from business school, we get together and golf once a year, when I had just joined, they were all giving me a hard time. Theyr’e all investment bankers and private equity guys and making big bucks and I moved back in my parents’ basement and wasn’t getting a salary because the company couldn’t afford to pay me. They loved it. It’s funny how it came full circle. In 2009, all the bankers and private equity guys were either hating their jobs or unemployed and Skullcandy was having its best year ever. It turned out OK.
Why did Rick decide to leave during the IPO process?
Rick in his heart is an entrepreneur. He and I had discussions over time about me someday taking over the business. As the company got bigger and got in the IPO process, I think he said “there are other entrepreneurial enterprises I’d like to focus on. I don’t think I’ll be sitting in a public CEO seat for the next five years--it’s time to do something different.”
From a timing standpoint, in the middle of an IPO was probably not ideal, but better before than after. You go out and pitch a management team and then take investor money, that’s tough. Frankly Rick is working on a couple other ventures and I think he’s loving what he’s doing.
With Stance and some other things?
Talk a little bit about your management style and why Rick saw you as a good choice to fill that role once he moved on, especially while you’re going public.
When you spend six years with someone with a lot of time and travel, you get to know the person pretty well. Rick and I have very different styles. I think you’d be hard pressed to find people that are as different as we are. We really complimented each other as we built the business. Rick knew me well, he trusted me, he’d seen the success that I’d had in helping build the business and first and foremost building a team and managing a team in an organization. I think he saw that I had the trust and the respect of the people in the organization, it was a fairly natural transition. It was fairly seamless in that I knew the business so well, I joined when it was doing less than a million bucks in sales and had really been ther at every step in the process of building the product line, the brand, the infrastructure, in China, the US, internationally. There really wasn’t a lot of question, at least that I was part of in terms of where the business was going from a leadership standpoint just because he’d seen what I was able to do.
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That’s a great way to transition, especially at that point. You can’t be bringing in an outside CEO.
It really was. It’s not easy for companies to bring senior managers, particularly CEOs, from the outside and I think having built up the trust of the team over time, that it was very easy.
I’m sure the IPO process was super labor intensive.
Oh my gosh, it was intense.
I love being with the team, I love building the business, focusing on the operations, and thinking about how we make this a stronger brand globally three, five, 10 years out.
What were the lessons you learned from that?
There were a lot of them (laughing). It was a really great experience and I’m glad I had the opportunity to do it once, but I don’t know if I want to do it again. In the early stages of the process, as you sit down to draft this S1 document, you’re sitting in a room with bankers and attorneys, and you’re literally writing a word at a time on a big screen. You have to be able to articulate your business strategy so well. You may think you know your strategy, but writing it down in a very succinct way makes you really think about what drives your business, where your strengths are and where your weaknesses are.
That sounds like a good process for any company to go through regardless.
It really was valuable for us. We went on a road show and pitched to hundreds of investors, and one of the more important lessons I learned, was the reason we had a good story to tell was that we had built a good business. Going public is a financial event, it changes the company a little bit, but our ability to be successful will be a function of our ability to continue to grow a world-class brand that people really love. Having seen other entrepreneurs go through the process, I think it’s easy to mistake an IPO for an ending point.
It’s also easy to be distracted in the process because it really is very intense and it takes a lot of time. It was a second job where I felt like I already had two jobs at Skullcandy. The ability to view it as a moment in time that’s going to facilitate the business’s growth going forward, but to keep in mind that you’re there to continue to grow a brand is super important. It will be important that we manage our investors and the Street in an effective way, but I don’t want us to lose track of the fact that we did it because we want to continue to build our brand.
It was interesting coming back from the road show. I was gone for three weeks. I spent the Fourth of July in Afghanistan which was an experience in itself for Skullcandy. We had the chance to spend a couple days in Kandahar and be dropped in the middle of a war zone. It was a cool experience, and then I went straight to New York and was gone for three weeks. I walked back in the office and I don’t think I’ve ever been gone for three weeks since I started. I had this great nostalgia of “this is what I love.” I love being with the team, I love building the business, focusing on the operations, and thinking about how we make this a stronger brand globally three, five, 10 years out. The Wall Street process is fun, it’s new, you meet some interesting people, but where the real work is done, and where the brand is built, it’s with the team and it’s being out with our customers.
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What do you see as the biggest differences for the company now that you’re responsible to external shareholders?
We ran our business in a fairly disciplined manner before we went public in terms of our financial planning, our budgeting, our strategic planning. A lot of those things won’t change. In having raised multiple rounds of financing for Skullcandy, I’m a big believer that every time you bring in investor money, you’ve got to get better. You’ve got to be a better steward of the brand and of your shareholders’ investment dollars. Going public is no different. We need to get better. There certainly is a step function in terms of the need to be more refined in how you plan your business, whether it be Street facing or how you report to the SEC in the filings.
We had planned for it and so we built the team and brought in people from the outside who had experience in the public process but also in managing these parts of the process that are a support to being a public company. We’re getting better. We’ve got to figure out how you tell a story and provide enough transparency to investors and yet continue to manage your strategy and not share too much of the secret sauce of the business, but it’s been one of the things that I loved about my six and a half years is that I’ve learned something new every single day.
In other jobs I didn’t have that experience. At Skullcandy, it’s not even a job, it’s not a career, it’s a lifestyle. It’s what I love doing every day. The public process was another one of those moments where I was able to learn something new. For me, that’s what makes a career fun. It’s always nice to recognize a problem and know how to resolve it but it’s also fun to have variety and do things as we’re building a business that I’ve never done before.
I was looking back, and the release that you moved into the CEO role was exactly five months ago today. How have your goals changed from when you stepped into this role and evolved to this point?
The most important thing for me when I was put in that role was to really continue to build the trust and confidence of the team. I think it’s important as people have their heads down and are focused on building their area of the business, it’s important to recognize that Skullcandy is evolving and changing quickly and people need to feel safe in their roles during that transition. I wanted to make sure they trusted me as a leader. One of the things that I’ve really focused on doing is being very transparent about the goals of the business and providing everyone, regardless of their role, enough context so that they’re not just focused on what they’re doing, but they get the vision of where we’re trying to take the company so that we’re moving in lock-step as a team. I have continued to focus on building the right team. Good organizations have the right people and have them in the right places. Skullcandy is great because of the people. Great brands are really the results of great cultures. It’s really important to me that we continue as we grow our organization to sustain a great culture and grow the brand.
Lastly, we are relentlessly focused on execution. We have always prided ourselves on being a company that does what it says it will do. It only becomes more transparent as you become a public company.
Through the IPO process, you guys raised nearly $200 million, what will that allow you to do in developing the business?
About half of that money went to provide liquidity to early investors. With the other we’re working out some interesting things. We’re going to acquire the distribution rights from our European distributor who had a long-term contract. We see a real opportunity to invest internationally. We’re using the proceeds from that IPO to close that deal this quarter. It will give us the ability to actually go to Europe and replicate what we’ve done in the US. When you sell through distribution, you generally don’t have the same alignment of interests. They’re box movers and want to move product and aren’t real brand stewards often times. We couldn’t have done that without going public. We’re focused on other joint ventures in key markets like Japan, China, and Mexico. It takes capital to build out partnerships.
From a team building standpoint, we still see real opportunity to improve our business. We have been investing a lot in product development. There are two pillars to our business – brand and product. We’ve really been focused on doing some very innovative things from a product and technology standpoint. Raising capital has given us the opportunity to step up our game in product development.
Can you share anything you’re working on?
Not at this time, but soon.
What can your retail partners expect to see from you under your leadership, and now that you’re public, will there be much of a change?
Going public in and of itself shouldn’t change much other than we will have some capital to do some interesting things, particularly in how we support our retailer with in-store fixturing, merchandising. We know that we win when we can tell our brand story at the point of sale and it’s not inexpensive to do that. We’ll provide them tools to be more effective in terms of merchandising. It’s part of this path of continuous improvement and being a public company has given us the resources we need.
The Q2 number looked really solid. What’s your take on why the stock has taken a 25% hit since the initial offering considering the 46% growth you posted over last year?
Boy, I was hoping you were going to have that answer for me. (laughing) We had a great second quarter. We’re really excited about the numbers that we posted and we feel really good about the health of the business. Over time we want our investors to make money--we’re really focused on managing the long term view of the business, the brand, the channel, the distribution, building a team.
One of the first things I said when I came back to the office, we pulled the whole team together, which we do once a month, was telling people that I don’t want them checking the stock price. Day to day if your emotional well being is tied to what the market does to your stock on any given day, then you have a long ride in front of you and you have the potential to be distracted. We take our fiduciary responsibility very seriously and we believe that focusing on building the brand and business is what we’re paid to do and stock price takes care of itself over time.
So in the long term you think it’s a good time to buy?
Could be – boy, there’s no doubt it’s been a choppy market over the last month. This is one of those cultural moments. You have a lot of people that might have otherwise been checking the stock and hitting refresh on their browser. That can be distracting. I want people to focus on the business. When you’re a private company, your stock goes up and down, you just don’t see it everyday and you can’t see it on your Yahoo Finance everyday. I’m impressed that we don’t have discussions at the water fountain about the stock price. We’re talking about the business and that’s the way it should be.