SoulCycle Spinning Toward IPO

The SoulCycle exercise phenomenon is coming to Wall Street.

SoulCycle Inc., the company that owns the eponymous exercise studios focused on, well, cycling, has filed to go public via an initial public offering, according to Securities and Exchange Commission documents.

As reported by The Wall Street Journal Thursday (July 30), the company disclosed financial data that included revenue for 2014, which came in at $112 million, a jump of 49 percent year over year. And the company’s net income margin came in at 23 percent, or $25 million.

WSJ noted that the company is looking to garner a valuation that would be similar to that of LuluLemon Athletica, citing unnamed “people familiar with [SoulCycle’s] thinking.” That would give the company a $900 million valuation, which in turn would translate into 15 times expected 2016 earnings before interest, taxes, depreciation and amortization, those sources said (this metric, commonly known as EBITDA, is a rough cash flow measure).

SoulCycle operates 38 studios, almost all located in three cities — New York, San Francisco and Los Angeles. The classes themselves cost about $32 per session, and attendees have spent millions of dollars on accessories and ancillary products, ranging from clothing to sports drinks. And, as WSJ reported, the brand is a strong one, as the company spends only about $1 million, less than 1 percent of sales, on marketing and advertising efforts.

Even while overall sales were up nearly 50 percent year over year in all of 2014, “same studio” sales were up 5 percent in the same period — indicating that the company relies heavily on expansion efforts. And in the quarter ended in March 2015, same studio sales improved, at 15 percent, while the total top line was up 53 percent to just under $35 million. Expansion plans include a target of “at least 250 studios” over the longer term, with an annual new opening rate of 10–15 studios.

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