Dissecting the SoulCycle Hype

Fast-growing SoulCycle filed for an IPO on Thursday, hoping to raise $100 million

Jul 31, 2015 at 1:46 PM
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    SoulCycle is about to hit Wall Street, as the exclusive fitness studio filed for an initial public offering (IPO) yesterday, with a $100 million fundraising target. The brand is hardly a household name, but that doesn't mean it hasn't been a major success story.

    According to its preliminary prospectus, SoulCycle -- which offers immersive, high-intensity spinning classes -- has been growing by leaps and bounds. From one Manhattan studio in 2006, the company has expanded to 38 locations centered around New York City, Los Angeles, and San Francisco. In fact, SoulCycle derives 97% of its revenue from these three metro areas.

    Digging deeper on the numbers, the fitness firm earned $25 million in 2014 on $112 million in revenue. Year-over-year, earnings and revenue grew 39% and 49%, respectively. Also enticing for potential investors, advertising expenses are on the decline, thanks to SoulCycle's strong presence in the social media world.

    Of course, it's easy to make money when you're bolstered by support from A-list celebrities, including Demi Lovato and Lady Gaga. Indeed, SoulCity has a cult-like following, allowing it to charge close to $80 for a pair of sweatpants, and almost $40 for a 45-minute session -- yet still boast an 85% customer retention rate.

    That's not to say SoulCycle's bulletproof. In its prospectus, the company put its finger on a few potential Achilles heels, including a social media backlash and supply chain concerns surrounding its proprietary bike.

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