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SoulCycle files for IPO

Jul 30, 2015

High-end spinning class operator SoulCycle is cruising into the public markets with an IPO.

The fitness company, which charges as much as $34 for a 45-minute spin class and has a huge following among celebrities has grown from a single, 31-bike indoor cycling studio on the Upper West Side in New York City to what it calls "a high growth lifestyle brand" with $112 million in annual sales. It is also highly profitable – generating $25.3 million in net income in 2014, up sharply from $7.6 million two years earlier.

That growth has been fueled in part by expansion. SoulCycle, according to a filing with the Securities and Exchange Commission announcing its plans to go public, now operates 36 studios, up from 12 in 2012. Nearly 2.9 million rides were utilized in its studios last year, at an average of almost 8,000 per day. The company also commands healthy margins, with adjusted earnings margins sitting at about 32%. SoulCycle in 2011 sold a majority stake to Equinox Holdings, a larger fitness club company that owns facilities in the U.S., United Kingdom and Canada.

To fully understand the cult behind SoulCycle, this line from the company's filing sums it up nicely: "During the class, the instructor leads the rider on an emotional journey that runs parallel to the physical workout." It touts the physical aspects of the class, often set to music, as helping riders' "physical and mental well-being." "We believe SoulCycle is more than a business, it's a movement."

SoulCycle generates outsized attention for a relatively small player in the roughly $30 billion U.S. gym and fitness club industry. Celebrities are counted as avid fans, and the "cult like" following of the cycling studio was recently parodied in an episode of Netflix's "Unbreakable Kimmy Schmidt."

"From the beginning, SoulCycle has attracted a following that includes business leaders, social influencers and celebrities who were drawn to the idea of an elevated, meditative fitness experience," SoulCycle said in its filing with the SEC. And while SoulCycle says it has in the past benefited favorably from that publicity it also warns that is a risk to its business.

"If in the future we lose such celebrity ridership, this could have a negative effect on our business," the company said.

SoulCycle only operates in seven metropolitan areas, all along the coastal United States. And the company's studios in the New York, Los Angeles and San Francisco regions account for about 95% of revenue. It warns it may not find as much demand in new markets as it seeks to expand – resulting in another business risk that investors should consider.

SoulCycle hasn't yet determined what stock exchange it will list on and what ticker symbol it intends to use when it goes public.

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