Yoga Recent IPO NASDAQ James Waggoner
Yoga Recent IPO NASDAQ James Waggoner

YogaWorks, Inc. (NASDAQ: YOGA): A Recent-IPO Yoga Company Well-Positioned For Success Within Its Industry

YogaWorks, Inc. (NASDAQ: YOGA) IPO

If you want to raise fast capital these days, start a business that contains the term Artificial Intelligence and you are practically home free. But what about a business like Yoga? Can you imagine the likes of Goldman Sachs hiring an analyst to follow Yoga? No matter how cool the idea, it isn’t going to happen.

This simple reality hasn’t stopped the founders of YogaWorks, Inc. from taking the business of peace and serenity into the frenzied and manic world of public ownership.

On August 9, 2017 underwriters’ lead by Cowen, Stephens, Guggenheim and Roth Capital filed an S-1 that could lead to YOGA raising about $45 million and becoming a public company.

 

YOGA Finviz.com 2017-08-14

YOGA Google Finance 2017-08-14

 

YogaWorks has a lot going for itself as a business, but going public is another matter. This is YOGA’s third attempt. Summer time is always an IPO lull period and this year has been ever more so.

So how is this sizable hurdle getting overcome? It has to start with a great franchise and a compelling business model. Let’s take a look at YOGA and see if they fit the bill.

Serenity Now

Yoga practitioners believe that healthy physical strengthening and stretching combined with meditation can lead to a feeling of centered positivity and relief from stress.

The increasing stress of daily living is helping popularize Yoga as a solution. Yoga offers benefits to students regardless of age so there are no demographic limits to its popularity.

YogaWorks, Inc. helps people improve their physical and mental well being through the 5,000 year old tradition of yoga, using a community-oriented experience.

Move Over Mom And Pop

You may have the impression that Yoga is a mom and pop local business with a small following. To some extent this is correct. No operator or brand has a big piece of the market.   This is where YogaWorks is different. They are the leader.

YogaWorks, Inc. is the only national brand positioned in six of the largest US markets in California (Los Angeles, Orange County, New York City, Northern California, Boston and Baltimore/Washington DC).

Last year almost 3 million students paid $55 million to YogaWorks in 50 company owned studios. That’s a lot of serenity. They also have a presence online MyYogaWorks.com for those seeking peace while on the move.

Unless my math is way off that is pretty hefty average revenue for each studio.

YogaWorks, Inc. offers a variety of class options ranging from rigorous physical exertion to classes that provide a deep stretch that is low-impact. So the demographic goes from grads to grammas; that’s the mass of America.

Fully Staffed and Professionally Trained

YogaWorks, Inc. has over 2000 employees. Many of them are Yoga teachers. They claim that their teacher-training program is highly respected within the yoga community. More than 11,000 teachers have graduated from the program since its inception.

YogaWorks is no new comer. They have been around since 1990. In recent times the company has geared up its management team to support much greater bigger level of business. The company is lead by former Merle Norman Cosmetics COO Rosanna McCollough who joined YogaWorks in 2015.

Overall they list 8 senior executives of which 6 have joined the firm within the past 24 months. That is a lot of executive firepower for a company of only $55 million in revenue. Not only is YogaWorks staffed up for greater volume, more volume is mandatory. The weight of all these administrative expenses results in a money loosing condition at present.

Respected Underwriters

YogaWorks, Inc. pasted the sniff test with three well-respected Wall Street underwriters that include Cowen, Stephens and Guggenheim Securities. After performing thorough due diligence, if these firms are willing to co-manage an offering of only $75 million, this is a comforting indicator.

Presuming the underwriters are successful in raising the capital, YogaWorks plans to pay off approximately $10 million in high costs notes. This leaves quiet a nice sum for expansion that could include both opening new studios as well as acquisitions.

If you are a typical asset based investor, the concept of yoga studios may be a step beyond your normal universe. After all, with yoga studios, most all the assets are intangibles: it is the brand name and the consumer franchise created by the experience. Students often gage their experience by the personal connection with their instructor. Those assets go down in the elevator every night. In the final analysis, the business of Yoga is a lot like a health club without all the weight machines.

At the same time, it is a business that lacks a dominant leader and in a totally homogenized world of monopolies and duopolies this industry has the opportunity to having a major national brand: YogaWorks, Serenity Now!

 

 Disclosure: James Waggoner does not own positions in YOGA and does not plan to initiate a position within the near future.

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James Waggoner

James Waggoner comes from a New York Wall Street career that covered more than 30 years. During that time he served as CEO of Sands Brothers Asset Management and Sands Brothers Ltd. He was the founder of The Kensington Group in 1988, an arbitrage hedge fund that produced IRR’s of 24.2% over a 10-year period. For the prior decade, James was an analyst and investment banker with Bear Stearns Cos. Inc. Institutional Investor Magazine recognized him on multiple occasions as one of the top analysts in his field. His international financial background includes VP of SoGen-Swiss International Corp. in Paris France where he advised major US financial institutions on corporate and global economic issues. James earned a degree in Finance and Economics from The Ohio State University.