One of the first companies in the connected fitness wearables market, San Francisco-based Fitbit, has registered for an initial public offering. While the company included a placeholder figure of $100 million for what it hopes to raise, the SEC filing is chock full of financial data for the company, which is turning an impressive profit, as well as other performance data like active users and devices sold.
Since its founding in 2007, Fitbit has sold more than 20.8 million devices as of the end of March 2015. While the company offers a half dozen fitness tracking wearables, it also offers a connected weight scale, the Aria, which has FDA clearance. Here's a rundown of some of the more interesting data and disclosures revealed in Fitbit's preliminary IPO registration filing, which will reveal more in the coming weeks as it gets updated ahead of the company's debut as "FIT" on the New York Stock Exchange.
Retail reach: Fitbit is in 45,000 retail stores in more than 50 different countries. The company said that of its retailers and distributors, Wynit Distribution, Best Buy, and Amazon.com accounted for approximately 13 percent, 12 percent, and 11 percent, respectively, of its revenue last year. For the first three months of 2015 those three accounted for about 19 percent, 10 percent, and 11 percent of its revenue.
Revenues and earnings: Fitbit had revenues of $14.5 million in 2011, $76.4 million in 2012, $271.1 million in 2013, and $754 million in 2014. It posted a net loss for the first three of those years but net income of $131.8 million last year. It also posted an adjusted EBIDTA of $79.0 million in 2013 and $191.0 million in 2014. For the three months of 2015, Fitbit posted revenues of $336.8 million, net income of $48.0 million, and adjusted EBITDA of $93.4 million.
Devices sold: Fitbit sold 200,000 devices in 2011, 1.3 million in 2012, 4.5 million in 2013, and 10.9 million in 2014. It sold 1.6 million during the first three months of 2015.
Paid active users: Fitbit had 0.6 million paid active users at the end of 2012, 2.6 million at the end of 2013, 6.7 million by year-end 2014, and 9.5 million paid active users at the end of March 2015. The company defines a paid active user as a registered Fitbit user who, within the three months prior to the date above has an active premium account or FitStar subscription, has paired a tracker or Aria weight scale with their account, or has logged a reading from one of those devices into their account. The company only counts one user account once even though some users have multiple devices.
Registered users: The total number of registered users on our platform has grown from 1.1 million as of December 31, 2012, to 4.5 million as of December 31, 2013, to 14.6 million as of December 31, 2014, and to 19.0 million as of March 31, 2015.
Gross margin: While media reports are rightfully making a lot of noise about Fitbit's 48 percent gross margin for 2014, the company stresses throughout its filing that the increase in gross margin over 2013 (when it was 22 percent), is "primarily due to a reduction in costs incurred in connection with the recall of the Fitbit Force."
International penetration: Fitbit notes that 25 percent of its revenue in 2014 came from sales outside of the US -- based on where their devices were shipped. For the first three months of 2015, 21 percent of revenues have come from outside of the US. Fitbit notes: "We believe our global opportunity is significant, and to address this opportunity, we intend to continue to invest in sales and marketing efforts, distribution channels, and infrastructure and personnel to support our international expansion, including establishing additional sales offices globally."
Employee wellness big opportunity, not much impact yet: Fitbit notes that while it offers a customized corporate dashboard tool to some customers who use its corporate wellness offering, the first year of this new tool is free. As a result the revenues from this product currently make up less than 1 percent of the company's business. This revenue stream is listed among the companies potential areas for revenue growth, however.
Fitbit spent about $33 million to acquire FitStar, so far: "In March 2015, we acquired FitStar for total consideration of $32.8 million, comprised of $13.6 million of common stock, $11.5 million of cash, and $7.7 million of contingent consideration. We determined the fair market value of the contingent consideration, according to which we may be obligated to issue additional common stock or pay cash, to be $7.7 million as of the acquisition date. The actual amount of additional common stock or cash to be paid, if any, will depend on market-based events that may occur in the future. We may continue to use cash in the future to acquire businesses and technologies that enhance and expand our product offerings."
Can't rule out future HIPAA expansion risk: When companies go public they need to reach and disclose any potential risks that their business may face in the future. The most interesting risk Fitbit pointed to was the possibility of HIPAA -- or some other privacy law getting voted in -- being expanded to include the kind of data Fitbit helps its users collect. "Governments are continuing to focus on privacy and data security and it is possible that new privacy or data security laws will be passed or existing laws will be amended in a way that is material to our business. Any significant change to applicable laws, regulations, or industry practices regarding our users’ data could require us to modify our services and features, possibly in a material manner, and may limit our ability to develop new products, services, and features. For example, changes in applicable laws and regulations may result in the user data we collect being deemed protected health information, or PHI, under the Health Insurance Portability and Accountability Act of 1996, and the Health Information Technology for Economic and Clinical Health Act. If that were to occur, we would be subject to additional regulation and oversight, any of which could significantly increase our operating costs."
