SoulCycle Files for IPO, Names Melanie Whelan CEO

SoulCycle reported revenue of 112 million in 2014 and 348 million for 2015 through March 31 Photo by Getty ImagesAlli Harvey
<p>SoulCycle reported revenue of $112 million in 2014 and $34.8 million for 2015 through March 31. (Photo by Getty Images/Alli Harvey.)</p>

SoulCycle Inc, New York, filed for an initial public offering (IPO) with the Securities and Exchange Commission on Thursday. It will separate from majority owner Equinox and operate independently prior to completion of the IPO.

SoulCycle, which charges about $34 for a 45-minute group cycle session, did not set an IPO date in the filing nor did it note the shares available or share price. SoulCycle reported revenue of $112 million in 2014 and $34.8 million for 2015 through March 31.

SoulCycle Holdings LLC was converted into SoulCycle Inc. (Delaware) on May 15 for the IPO. 

SoulCycle Inc. and Equinox are planning to enter into an agreement to facilitate the spinoff transition, according to the filing. Equinox will provide general corporate management services and legal advice for one year, and real estate leasing and capital improvement related services for two years. That agreement can be terminated by either party on 30 days written notice.

Co-Founders Elizabeth Cutler and Julie Rice were each paid $89.8 million in redemption for their common units as part of the conversion, and each will have common units representing 1 percent of the post-transaction. Cutler and Rice will serve as co-chief creative officers in SoulCycle Inc. until at least December 2018, and each will make $618,000 in 2015.

Former Equinox executive Melanie Whelan, who joined SoulCycle in 2012 as chief operating officer, will serve as CEO until July 2019, and she will make a base salary of $475,000 in 2015.

"SoulCycle is a rapidly growing lifestyle brand that empowers our riders and offers an immersive fitness experience," Whelan said in a statement. "I am thrilled to work with Elizabeth, Julie and the board to grow this exciting brand."

Larry Segall, who previously served as Equinox's chief financial officer for 10 years, will be SoulCycle's CFO.

SoulCycle's revenue was $75.3 million in 2013 and $36.1 million in 2012, according to the filing. The company operated 38 studios as of March 31, with 23 in the New York City metro area.

Studio fees make up the majority of SoulCycle's total revenue, with $29.7 million (85.5 percent) reported through March 31 and $93.7 million (83.7 percent) reported in 2014. The studios average 72,000 rides per week. Thirty percent of its weekly rides are reserved within the first 15 minutes of availability in its "Monday at noon" experience. SoulCycle reported 2.88 million rides in 2014.

SoulCycle said in the filing that it can open at least 10 to 15 new studios per year "for the next several years" and grow its current domestic footprint to at least 250 studios. The company said the brand can be transported abroad, which will generate growth incremental to the planned domestic footprint.

Soul Cycle is planning to open a studio on Boston's Boylston Street this fall.

In addition to expanding its studio base, SoulCycle said optimizing market presence, growing its community and brand extension opportunities are key elements to its growth strategy.

SoulCycle measures market presence in rides per day, which was listed at 10,378 through March 31. The company cited grassroots marketing initiatives, digital engagement programs and social responsibility activities as nurturing the growth of the brand. SoulCycle said it can monetize the brand beyond the studio walls with retail apparel and by expanding its digital platform.

The filing also listed risk factors involved for potential investors. SoulCycle said its success depends on brand reputation and the ability to attract and retain riders. Its business and growth rate could be negatively affected if it cannot attract and retain riders or if new markets fail to gain acceptance.

SoulCycle had approximately 1,237 employees as of March 31: 212 instructors, 156 corporate personnel and 869 studio employees. Cutler and Rice each made $1.2 million in salary in 2014, according to the filing.

Cutler and Rice founded SoulCycle in April 2006 on the Upper West Side of New York City in a single, 31-bike indoor cycling studio. Today, SoulCycle claims it has a community of 300,000 unique riders who created an online account and attended a paid or complimentary class.

Underwriters for the IPO are Goldman, Sachs & Co; Merrill Lynch, Pierce, Fenner & Smith Inc; Citigroup Global Markets Inc; William Blair & Company LLC; Cowen and Company LLC; and RBC Capital Markets LLC.

SoulCycle is the latest fitness industry brand going public.

Earlier this week, Planet Fitness set its IPO share price at $14 to $16.

Mindbody, which offers software to fitness facilities, debuted on the NASDAQ under the symbol 'MB' on June 19. Other publicly traded fitness companies include Town Sports International (NASDAQ:CLUB), Club Corp Holdings (NYSE: MYCC),Fitbit (NYSE:FIT), Life Fitness, which is part of Lake Forest, Illinois-based Brunswick Corp. (NYSE: BC) and Precor, a division of Helsinki, Finland company Amer Sports(HEL:AMEAS). Life Time Fitness, which traded publicly since 2011, ceased trading on the New York Stock Exchange in June and returned to operations as a private company.

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Town Sports International is working on a deal with lenders and a private equity firm to buy the company after its Chapter 11 filing on Sept. 14.

Flywheel Sports Inc. is liquidating the company in a Chapter 7 filing, closing its 42 studios and laying off 1,200 employees.

In total, 12 fitness franchise brands made the 2020 Top Growth Franchises list, which is based on steady growth over a three-year period.