Fitbit, the fitness tracker leader, filed for an initial public offering to raise up to $100 million, and surprised some by showing that it’s been profitable for several quarters.
The eight-year-old company, based in San Francisco, will be the first Silicon Valley company focused solely on wearable technology to go public and the offering comes just as Apple gets into the wearable space with the launch of the Apple Watch. Samsung, Microsoft, Google LG, and other major electronic companies have also come out with wearable devices that count users’ steps, measure sleep patterns and track other fitness data.
Founded in October 2007 by James Park and Eric Friedman, Fitbit makes a wide range of simple, colorful devices that are clipped or strapped on the body for counting steps, measuring sleep activity and monitoring workouts. Companion software for smartphones and a Web application both display stats, offer insights and training tips and helps users track what they eat to measure caloric intake and other daily health metrics.
Touting the opportunity, Fitbit notes in its prospectus that based on information from industry sources, consumers are estimated to have spent over $200 billion in 2014 on health and fitness services, such as gym and health club memberships, commercial weight management services, and consumer health products, such as weight management products and dietary supplements. In addition, IBISWorld estimates that the corporate wellness industry will grow from $7.4 billion in 2014 to $10.4 billion in 2018 in the U.S.
“Over eight years ago, in early 2007, we started Fitbit with the vision that sensors, data and amazing software could transform the way people think about health and fitness,” the founders wrote in a short note to prospective investors. “Thanks to the employees of Fitbit who believed in the vision and who have worked passionately to create something incredible out of nothing. Thanks to our users who have trusted our products and our company to improve their lives. Thanks to our investors who believed in us and the opportunity.”
The founders added, “The journey is not over and, in fact, it is just beginning. This offering is just one milestone among the many that we have reached in the past and will reach in the future. We hope that all of us will continue as we have in the past: focused on the long-term and creating and transforming while remaining humble and deeply appreciative of everything that we achieve and are given.”
The company had net income of $48.0 million for the three months ended in Mar. 31 on sales of $336.8 million. That compares to earnings of $8.9 million on sales of $108.8 million the prior year.
In 2014, earnings reached $131.8 million on sales of $745.4 million. In 2013, Fitbit lost $51.6 million on $271.1 million in revenue. In 2012, the loss was $4.2 million on sales of $76.4 million.
Fitbit sold 10.9 million devices last year, up from 4.5 million in 2013, and 1.3 million in 2012.
“We have rapidly grown to become a leading global health and fitness brand” management wrote in the filing. “We sell our products in over 45,000 retail stores and in more than 50 countries, through our retailers’ websites, through our online store at Fitbit.com, and as part of our corporate wellness offering. Our broad distribution and market-leading connected health and fitness platform have driven significant growth since our founding.”
Fitbit also reported that its “paid active users” grew from 600,000 in 2012 to 9.5 million in the first quarter of 2015. These users either own a $50-a-year Fitbit Premium membership; paired a wearable device or a Fitbit Aria scale with a Fitbit account; or logged at least 100 steps with a wearable device or took a weight measurement with an Aria scale.
“We believe that we have been one of the drivers of the growth of the wearable devices market, and that the future growth of this market represents a significant opportunity for us,” Fitbit said in its filing.
Fitbit acknowledged its many competitors in its prospectus, specifically mentioning Apple’s device as a potential threat. Other competitors include Garmin, Jawbone, Misfit and Pebble. In its risk factors, Fitbit notes, “Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us.”
According to the filing, insiders currently own more than half of Fitbit’s stock. Park and Friedman together control about 21 percent. The largest outside shareholder is Foundry Group Funds, which owns 28.9 percent, while True Ventures owns about 22.4 percent. The prospectus did not list how much stock shareholders plan to sell.
Fitbit plans to trade on the New York Stock Exchange under the ticker symbol FIT. Its offering is being led by Morgan Stanley, Deutsche Bank and Bank of America Merrill Lynch.
