Coverage: Fitbit files for IPO

You see them on nearly every wrist (particularly in New York). Now Fitbit is looking to overcome its fad status by filing for an initial public offering. Wearables are hot and the company is looking to capitalize on its name recognition.

Yoree Koh had this story for The Wall Street Journal:

Fitbit Inc., a pioneer in wearable fitness tracking, on Thursday filed for an initial public offering to help fend against a mounting assault from a range of corporate giants eager for a piece of the burgeoning market.

The San Francisco maker of devices that track movement and sleep quality revealed it earned a $131.8 million profit last year on revenue that nearly tripled to $745.4 million. Since 2007, Fitbit has sold roughly 20.5 million of its fitness-tracking devices—from the $60 Zip clip-on to the $250 Surge wristwatch—with more than half sold last year alone.

Fitbit said Thursday it is seeking to raise up to $100 million, although that amount is a placeholder and is subject to change. It aims to trade on the New York Stock Exchange under ticker symbol FIT. The company valued itself at roughly $1.2 billion in March. It isn’t yet clear what valuation the company will seek in the IPO.

Its products’ novel ability to count the number of daily steps and monitor distance traveled and calories burned seized the attention of data-obsessed modern consumers and paved the way for a new category of hardware technology.

Bloomberg’s Mohammed Hadi wrote that Fitbit’s share sale is a first for the market:

A Fitbit IPO would be among the first for the wearable-technology market, and comes after Apple Inc. rolled out its Apple Watch — which has health-tracking capabilities. Fitbit identifies the Apple Watch as a competitor in its prospectus.

The company’s sales surged in 2014 to $745.4 million from $271 million in 2013. It sold 10.9 million devices last year and was profitable, with earnings of $132 million, the filing shows. Fitbit plans to use proceeds from the offering for working capital and other general corporate purposes.

The number of fitness trackers is projected to more than triple to more than 70 million devices by 2018, according to a report last year from Juniper Research.

Fitbit also faces competition from Microsoft Corp.’s activity-tracking wristband called Band, and Jawbone.

Ben Popper wrote for The Verge that Fitbit is also increasing the number of premium users:

Fitbit also reported strong growth in its “paid active users”, growing from 600,000 in 2012 to 9.5 million in the first quarter of 2015. Fitbit Premium offers benchmark analytics, a digital trainer, and other perks for a price of $49.99 a year. With this side of the business, Fitbit is seeking to offer a full spectrum health and fitness product. It makes a much more aggressive projection on this front, writing that “based on information from industry sources, we estimate this market represents an over $200 billion opportunity and includes consumer spend 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.”

The company plans to trade under the ticker symbol “FIT.” It’s success is a strong contrast to Nike’s exit from the fitness wearable market and the reported struggles of its rival, Jawbone. “Every time I look at our data they have a larger and larger share of our digital fitness market,” said Ben Arnold, an industry analyst and executive director at the NPD Group. “For the most recent 12 months through March they have 74 percent of that fitness tracker market. A year ago it was 62 percent. They are growing their share in a growing market.”

The Fortune story by Dan Primack said the company accounts for more than half the market for fitness wearables:

The company also reported selling 10.9 million devices last year, which means that it accounted for more than half of last year’s fitness band market.

Fitbit has raised over $80 million in VC funding since its 2007 founding, from firms like Foundry Group (28.9% pre-IPO stake), True Ventures (22.4%) and SoftBank Capital (5.6%), Sapphire Ventures, Qualcomm Ventures and Felicis Ventures.

Co-founders James Park (CEO) and Eric Friedman (CTO) each received around $222,000 in base salary last year, and the equivalent of $7.8 million in total compensation.

Fitbit reports having around $238 million of cash on the books, and $160 million in debt.

The company is definitely moving to capitalize on its market share and current profitability status. Fitbit is quickly becoming a household name for a certain set of fitness-obsessed professional. And it’s smart to take advantage of that buzz while possible. But like most IPOs, the true test will be in the company’s long-term performance.