Today, Peloton, the manufacturer of expensive home bicycles and treadmills, sent along with the on-demand gym S-1, with detailed plans for the much-awaited public offering.
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In June, we covered how the company had confidentially filed to go public. So as we reported back then, this news is not shocking. In February, Alex detailed the New York-based company's financing history ahead of the big day. Founded in 2012, Peloton has raised nearly $ 1 billion. The most recent increase was a $ 550 million Series F, announced in August last year, valued at $ 4.1
Since the first financing outside, raised through a Kickstarter campaign that put $ 307,332 in startup capital (minus Kickstarter & # 39; s market fee) back in July 2013, Peloton raised nearly $ 995 million in private market funding.
In terms of growth, the company cited over 1.4 million members so far, which inspired more than 58 million Peloton trainings in fiscal 2019. Its current product portfolio consists of bicycle, treadmill and training – and wellness subscription services, which can hover around $ 39 a month. Digital subscribers pay $ 19.49 a month just to access Peloton content on their smartphones.
Interestingly, the company noted that it grew its "Connected Fitness Subscribers" from 35,135 as of June 30, 2016, to 511,202 from June 30, 2019, representing an annual growth of approximately 144.1 percent.
Calculations described in the company's S-1 indicate that Peloton users are also becoming more engaged in the connected subscription service. In the fiscal year ended June 30, 2019, Peloton subscribers logged an average of 11.5 workouts per month, compared to an average of 7.5 workouts per month for the year ending June 30, 2017. This may indicate that Peloton's investments in growing a network of training instructors, and the content they create, has paid off.
The company's fastest-growing demographic is "consumers under 35 and those with household incomes below $ 75,000," it says in S-1.
Peloton, which appears to be listed on the Nasdaq under the ticker symbol "PTON", has seen explosive growth over the years – and that counts as a risk factor. The company noted in its filing that it grew from 443 employees in June 2017 to 1,950 employees in June 2019.
Inside The Gears Of Peloton & # 39; s Business
In the filing, the company revealed some impressive revenue figures. For the fiscal year 2019, Peloton reported revenue of $ 915 million, up 110 percent compared to $ 435 million in fiscal year 2018. There is more than four times $ 218.6 million in revenue it saw in fiscal year 2017. (Peloton's fiscal year ends June 30 each calendar years.)
However, net losses also increased over the same time frame. According to the filing,
Peloton posted a net loss of $ 195.6 million in fiscal year 2019, well up from a net loss of $ 47.9 million in fiscal 2018 and one of $ 71.1 million in fiscal 2017.
While It is common for companies to grow rapidly to make deficits, a quadrupling of net losses is not attractive. It appears that the company's sales and marketing expenses are owing, growing from $ 151.4 million in fiscal year 2018 to $ 324 million in fiscal 2019. That's more than double that; Peloton's sales and marketing costs are also roughly doubled from fiscal year 2017 to fiscal year 2018.
Peloton's growth has not come cheap.
The company has in fact gone from generating cash from operations to heavily negative operating cash flow. In fiscal year 2018, Peloton's operations generated $ 49.7 million in cash. In fiscal 2019, that figure fluctuated to negative $ 108.6 million.
Combined with the company's increasingly negative investing cash flow (negative $ 10.2 million, negative $ 56.7 million and negative $ 297.5 million in fiscal year 2017, 2018 and 2019), Peloton is likely to publish accounts further. The company reported $ 162.1 million in cash and equivalents along with $ 216 million in marketable securities at the end of fiscal 2019. It will be a good while, but not forever at the company's current pace of cash consumption.
Margins  A key issue in the company's S-1 filing concerned the company's margins. Namely, what was its mixed margin result of total revenue, and what kind of margin it could earn from hardware revenue and software revenue, respectively.
Looking at the 2019 fiscal year, Peloton's mixed gross margin was about 42 percent. That's not bad at all, given the company's rapid revenue growth. Hardware ("Connected Fitness Products") had gross margins of 43 percent in the fiscal year, better than we expected.
However, the company's recurring digital class revenue ("Subscription") also had margins of about 43 percent. It's lower than we expected. Fortunately for Peloton, selling bicycles is a better business than expected, more than compensating for their more expensive than expected subscription revenue.
Who Owns What
Finally, let's get into the facts and figures related to ownership. In other words, which venture capital fund celebrates its bet.
On page 132 of Peloton's S-1, you will find the breakdown of investors.
Peloton CEO John Foley received 15,169,568 B shares, or 6.2% of the total shares. William Lynch, the president of the company, received half of it – 7,502,716 class B shares, or 3.1% of the shares.
There were three executive women listed in this section of Peloton's S-1: Jill Woodworth, Karen Boone, and Pamela Thomas-Graham. Woodworth, the company's chief financial officer, received 3,500,000 shares, while Boone and Thomas-Graham each received 600,000.
True Ventures' Jon Callaghan got 28,369,274 shares, and Tiger Global Management received 46,721,427 shares, more than any other investor or executive listed S-1.
Peloton took on Goldman Sachs, JP Morgan, Bank of America Merrill Lynch and others as underwriters for IPO.
Illustration: Li-Anne Dias