IPO Report: FITBIT (FIT)

Francis Gaskins |

Fitbit.jpg

FITBIT (FIT) platform combines connected health and fitness devices with software and services, including an online dashboard and mobile apps, data analytics, motivational and social tools, personalized insights, and virtual coaching through customized fitness plans and interactive workouts. The company is based in San Francisco, CA.

Six other companies are scheduled for the week of June 15. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Morgan Stanley, Deutsche Bank Securities, BofAMerrill Lynch
Co-managers: Barclays, SunTrust Robinson Humphrey, Piper Jaffray, Raymond James, Stifel, William Blair

End of lockup (180 days): Monday, November 16, 2015
End of 25-day quiet period: Monday, July 13, 2015

FIT scheduled a $448 million IPO with a market capitalization of $3.08 billion at a price range midpoint of $15 for Thursday, June 18, 2015 on NYSE.

Summary

The Fitbit platform combines connected health and fitness devices with software and services, including an online dashboard and mobile apps, data analytics, motivational and social tools, personalized insights, and virtual coaching through customized fitness plans and interactive workouts.

FIT’s platform helps people become more active, exercise more, sleep better, eat smarter, and manage their weight. Fitbit appeals to a large, mainstream health and fitness market by addressing these key needs with advanced technology embedded in simple-to-use products and services.

Valuation

Glossary

Retained earnings

.

.

$115

     

Per share dilution

.

.

-$12.64

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Fitbit (FIT)

$3,000

2.2

15.6

5.5

6.4

15%

Conclusion

Buy

Q1 '15 vs Q1'14

. Rev +209%

. Gross profit +278%

. Net income +441%

P/E 15.6

Price-to-sales 2.2

Price to book 5.5

No recurring rev

Prices are lower than Apple watch for a different market segment

Business

FIT is transforming the way millions of people around the world achieve their health and fitness goals. The Fitbit platform combines connected health and fitness devices with software and services, including an online dashboard and mobile apps, data analytics, motivational and social tools, personalized insights, and virtual coaching through customized fitness plans and interactive workouts.

FIT’s platform helps people become more active, exercise more, sleep better, eat smarter, and manage their weight. Fitbit appeals to a large, mainstream health and fitness market by addressing these key needs with advanced technology embedded in simple-to-use products and services.

FIT pioneered the connected health and fitness market starting in 2007, and since then, FIT has grown into a leading global health and fitness brand.

As of March 31, 2015, FIT has sold over 20.8 million devices since inception. According to The NPD Group, FIT held the leading position in the U.S. connected activity tracker market, with an 85% share, by dollars, in the first quarter of 2015.*

The core of FIT’s platform is its family of six wearable connected health and fitness trackers. These wrist-based and “clippable” devices automatically track users’ daily steps, calories burned, distance traveled, floors climbed, and active minutes and display real-time feedback to encourage them to become more active in their daily lives.

Most of FIT’s trackers also measure sleep duration and quality, and its more advanced products track heart rate and GPS-based information such as speed, distance, and exercise routes.

Several of FIT’s devices also feature deeper integration with smartphones, such as the ability to receive call and text notifications and control music.

In addition, FIT offers a Wi-Fi connected scale that records weight, body fat, and BMI. FIT dedicates significant resources to developing proprietary sensors, algorithms, and software to ensure that its products have highly accurate measurements, insightful analytics, compact sizes, durability, and long battery lives. FIT is able to enhance the functionality and features of its connected devices through wireless updates.

Intellectual Property

As of March 31, 2015, FIT had 77 issued patents and 132 patent applications pending in the United States.

FIT continually reviews its development efforts to assess the existence and patentability of new intellectual property. FIT pursues the registration of its domain names and trademarks and service marks in the United States and in certain locations outside the United States.

To protect its brand, as of March 31, 2015, FIT had an international trademark portfolio comprised of 65 registered trademarks and 139 trademark applications pending with filings in 68 countries.

Competition

The connected health and fitness devices category has a multitude of participants including specialized consumer electronics companies such as Garmin, Jawbone, and Misfit, and traditional health and fitness companies such as adidas and Under Armour.

In addition, many large, broad-based consumer electronics companies either compete in FIT’s market or adjacent markets or have announced plans to do so, including Apple, Google, LG, Microsoft, and Samsung.

For example, Apple has recently introduced the Apple Watch smartwatch, with broad-based functionalities, including some health and fitness tracking capabilities.

FIT also competes with a wide range of stand-alone health and fitness-related mobile apps that can be purchased or downloaded through mobile app stores.

5% Shareholders Pre-IPO

James Park       10.9%

Eric N. Friedman           10.9%    

Jonathan D. Callaghan   22.4%

Steven Murray   5.6%     

Foundry Group Funds   28.9%

True Ventures II, L.P.     22.4%

SoftBank PrinceVille Investments, L.P.   5.6%    

Dividends

No dividends are planned.

Use of Proceeds

FIT expects to receive $311 million from its IPO and use it for the following:

for working capital and other general corporate purposes, including research and development and sales and marketing activities, general and administrative matters, and capital expenditures. FIT may also use a portion of the net proceeds to invest in or acquire complementary businesses, products, services, technologies, or other assets.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FIT Fitbit Inc. Class A 8.14 -0.28 -3.33 8,951,873

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