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independent consumer stock research, Independent research on Consumer IPOs, independent research on IPOs, Independent research on Peloton Interactive, Independent Stock Research, IPO Research, The Battle Road IPO Review

Peloton Interactive: Riding High on Consumer Spending

Peloton LogoPeloton Interactive (NASDAQ: PTON), a high-end fitness products company, is a relatively recent addition to our Battle Road IPO Review Consumer sector coverage. Founded in 2012 and based in New York City, Peloton is expected to record revenue of $1.48 billion in its fiscal year ending June 30th 2020, along with a loss per share of $1.29. This compares to revenue of $915 million in fiscal year 2019, during which the company recorded an operating loss of $113 million, excluding depreciation expense.

Peloton announced the pricing of its 40 million Class A share IPO on September 25th. The deal was priced at $29 per share, and was led by a remarkably large number of underwriters—21 in total—reflecting in part the recent IPO drought. Peloton also announced the concurrent sale of 3.5 million additional shares of its Class A common stock in a private placement to entities affiliated with TCV, an existing shareholder. Following the IPO, roughly 45 million Class A and 236 million Class B common shares outstanding for a total of 281 million shares outstanding, with Class B shares holding 99 percent of the voting power. At a recent share price of $28, Peloton Interactive possesses a market cap of roughly $7.9 billion.

Peloton Interactive positions itself as an interactive fitness platform at the “nexus of fitness, technology and media,” which creates, in its own words, “engaging to the point of addictive” programming for customers. PTON is primarily a high-end exercise bike and treadmill company, with approximately 69 percent of sales coming from connected products, with most of the remaining 31 percent from subscriptions associated with its product sales. Over the last five years, the company has sold over 580,000 exercise bike and treadmills, with about 97 percent of the total sold in the U.S. Roughly 50 percent of revenue comes from sales from its website onepeloton.com. Other channels include showrooms. The company claims over 1.4 million member subscribers, who completed over 58 million workouts in fiscal 2019.

To peruse Peloton’s product offerings on its company website is to realize just how strong today’s consumer economy has become. Pricing for Peloton’s exercise bike begins at $2,245, with a one year limited warranty, and pricing for its tread machine begins at $4,245, with a one year limited warranty. In the most recent quarter ended September 30th, Peloton reported revenue of $228 million, a 104 percent increase over the prior year, along with a gross margin of 46 percent, flat with the prior year. The company’s operating loss was $51 million, as compared to an operating loss of $56 million in the prior year. Post-IPO Peloton has a strong balance sheet, with roughly $1.5 billion in cash, or $5.25 in cash per share, and no debt, though we do note that the company is currently not profitable.

Tags: IPO Research, independent research on IPOs, independent stock research; independent research on Peloton Interactive, independent research on Consumer stocks; independent research on Consumer IPOs.

Independent research on Dyantrace, Independent research on performance monitoring, Independent Stock Research, IPO Research

Dynatrace: Performance Monitor

Dynatrace (NYSE: DT), a provider of application and performance monitoring software and services, becomes the most recent addition to our Software sector coverage. Originally developed inside of Detroit Michigan-based Compuware, the company was spun out as a separate entity, when Thoma Bravo, a private equity investor took Compuware private in 2014. Today, Dynatrace is based in Waltham, MA. Consensus estimates call for revenue of $523 million and EPS of $0.20 for FY’20 (ended June 30th), followed by revenue of $650 million, and EPS of $0.26 in FY’21.

Dynatrace debuted on the New York Stock Exchange on August 1, 2019 in a 41 million share common stock offering priced at $16 per share. Goldman Sachs, J.P. Morgan and Citigroup Global Markets led the underwriting team, along with nine other firms that assisted in placing the shares. With 39 million shares offered by the company, Dynatrace raised an estimated $590 million in net proceeds from the offering. At a recent share price of $17, DT carries a market cap of roughly $4.8 billion.

Dynatrace serves customers that run software both on premise and in the cloud. Dynatrace helps to manage the availability of software across a corporate network, and then pinpoint and monitor software and network bottlenecks. The company also provides software to simulate user performance prior to the rollout of new software, or software updates to prevent user backlash.

Originally based in Austria, Dynatrace was moved to the US in 2008, where John Van Siclen became CEO three years before it was acquired by Compuware for $295 million. Van Siclen has remained with the company ever-since, even as it bulked up with additional acquisitions made by Compuware, such as the 2008 acquisition of Gomez, a Lexington, MA based provider of web application performance management software. After the company was spun out from Compuware, Thoma Bravo merged Keynote, another software company in its portfolio, into Dynatrace.

Dynatrace currently counts nearly 1,600 customers as recurring revenue customers on contract as of the end of the most recent quarter. These customers generate at least $10,000 of annual recurring revenue. The company’s recent FY’20 Q1 (ended June 30th) results indicate that the company has gained substantial momentum in its transition to an all-subscription-based software company, with subscription revenue of $108 million, a 38 percent increase over the prior year. At the same time, license revenue declined by 65 percent from $11 million in the June 30 2018 quarter to just $3.8 million.

Post-IPO Dynatrace has a mediocre balance sheet, with roughly $647 million in cash, along with $1 billion in long term debt, as well as $600 million payable to a related party, which, as best we can tell, relates to the spin-out from Compuware when the entire entity, including Dynatrace, was acquired by Thoma Bravo in December of 2014. The company’s balance sheet structure makes it likely that Dynatrace will emphasize EBITDA rather than EPS in the near term.