The $5 billion valuation Fitbit is about to become the first IPO sports tracking wearable company?
Fitbit is an iconic wearable company that has accounted for a significant market share in Fitbit's motion-tracking range of wearable devices worldwide in recent years. On May 7th, this article will take you to the in-depth analysis of this pioneering company's IPO.
Since the beginning of last year, the gossip about Fitbit's income has begun to spread in the industry. Investors have reacted differently to this number. Some believe that the number is flawed, while others think it is highly authentic or reserved. The rise of Fitbit is a story about wearable devices. In this field, the polarization is serious, and the outside world has many misunderstandings, underestimations, and even malicious slander. This article focuses on Fitbit's recent public offerings - some journalists call it "stupid IPO", while others praise the company for "surprising profits." Fitbit's S-1 document answers the questions people have been arguing over the years, but it still leaves a lot of unanswered questions.
Objectively speaking, Fitbit shows us a remarkable growth story. Less than six years after it launched its first device, and with less than $70 million in financing at the time, the company has grown into a leader in revenues (net income) of more than a few billion dollars (50% gross margin) , became a pioneer in the "Networkable Health and Fitness" tracker category. Regardless of any analysis of changes in their S-1 filings, IPO prices, or post-marketing prices, what James Park and his team should do on Fitbit should not be erased. Park is a determined and visionary founder, but at the beginning of his amazing entrepreneurial story, no one wanted to fund him. However, nowadays, he and his Fitbit are standing on the cusp of the IPO.
Core finance
Since the launch of the first device at the end of 2009 (a year later than previously promised), Fitbit has experienced explosive revenue growth, with an annual growth rate of 246% between 2010 and 2014, and reached nearly $750 million in 2014. Sales. From the actual revenue of Q1 2015, the growth of ASP (Annual Selling Price) and the historical holiday sales in the past, we expect Fitbit's full-year revenue in 2015 to be between US$1.6 billion and US$2 billion. .
The revenue growth of the past year – and is likely to extend to 2015 – is not only due to the increase in sales of Fitbit devices, but also because of the increased ASP of its devices. The increase in average selling price is the result of a combination of reasons, one of which is likely to be the high-priced product line that Fitbit continues to launch (its first non-recall device sold at a suggested retail price of $99 debuted in Q4 2014). The second may be a positive shift to a higher-margin distribution channel. (Note: The calculated ASP is based on an emphasis on the average order revenue of each sold device and the average affiliate revenue per sold device, both of which are assumed to be negligible.)
To some observers' expectations, Fitbit has achieved profitability, with its operating profit for 2014 reaching $158 million. In the past eight quarters, the company's gross margin (controls affected by the massive recall of Fitbit Force) averaged more than 48%, while its operating margin was on average higher than 21%. These impressive numbers help explain why the company has no additional venture capital financing: its own capital flow is sufficient to achieve the company's business activities.
User, participation and retention
In the S-1 file, Fitbit provides limited user engagement data. Fitbit's software platform is based on traditional Internet metrics, and we can't clearly see from the application documents how many users are participating (daily active users and monthly active users). Most wearable devices are abandoned a few months after launch, and this is the biggest criticism of such devices. In contrast, Fitbit proposed its own indicator: Paid Active Users (PAUs). PAU is defined as a user who has done any of the following in the past three months: ordered Fitbit Premium or FitStar; has a tracker or weight scale paired with a Fitbit account; login records 100 steps; or login history A weight measurement was made. Fitbit uses the simple metrics of PAUs compared to registered users (RUs) to test user retention levels on the Fitbit platform (the higher the ratio, the better). In 2014, PAU/RU was 46%, and in the most recent quarter (Q1 2015), this figure has increased to 50% due to the near-term effect of a single year compared to a single quarter.
However, this does not seem to represent the full picture of Fitbit users. Based solely on this information, we can only guess that there are more than 10 million inactive Fitbit devices on the market, which is 50% of all the devices sold to date, or in other words, the sum of all the devices sold between 2009 and 2013. many. With the S-1 file alone, we can't clearly say that the vast majority of Fitbit devices sold before 2014 are no longer used, but beyond this conclusion, there seems to be no other possibility.
Another way to study user participation on the Fitbit platform is to look at user churn values ​​or negative PAUs values. Such an indicator can be constructed by subtracting the change in PAUs from the sum of equipment sold during the same period of time (assuming that buyers of these equipment become active after purchasing equipment and become the main driver of new PAUs). - relative to the reactivated user or the new subscriber). The perspective of using negative PAUs or user churn provides a better way for us to study Fitbit's user retention on its platform, although it can't be done. Some analysts pointed out that in 2014, Fitbit lost 6.8 million PAUs, of which 2.6 million were PAUs before the end of 2013, while the remaining 4.2 million can only be added to users in the first three quarters of 2014 (by definition, fourth Quarterly PAUs cannot be lost before the end of 2014 because PAUs are measured every three months). This means that more than 70% of Fitbit buyers in the first three quarters of 2014 were lost before the end of the same year (calculated by the equipment revenue distribution sold in Q2 / Q3 in 2014).
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