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A quick tweetstorm on the Mirror / LuLu acquisition and why it was a steal at that price
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="Thread" aria-label="Emoji: Thread">
Early reporting putting the pricetag at $500M on slightly more than $100M in expected 2020 rev.
Deal is all cash, out of $LULU& #39;s $800M in cash on hand, with $50m worth of handcuffs ("held back and paid out over two years")
2/ https://www.nytimes.com/2020/06/29/business/lululemon-buys-mirror.html">https://www.nytimes.com/2020/06/2...
Deal is all cash, out of $LULU& #39;s $800M in cash on hand, with $50m worth of handcuffs ("held back and paid out over two years")
2/ https://www.nytimes.com/2020/06/29/business/lululemon-buys-mirror.html">https://www.nytimes.com/2020/06/2...
For context, $PTON, a direct competitor, trades at 11.2x TTM revenues. Given that it& #39;s midyear and the ~100m figure is a 2020 estimate, let& #39;s say the Mirror deal was 5.5x.
So Lulu bought a proven business model at half the going public market rate.
https://finance.yahoo.com/quote/PTON/financials?p=PTON
3/">https://finance.yahoo.com/quote/PTO...
So Lulu bought a proven business model at half the going public market rate.
https://finance.yahoo.com/quote/PTON/financials?p=PTON
3/">https://finance.yahoo.com/quote/PTO...
The global pandemic has hugely benefited the two companies.
$PTON reported 66% YoY topline growth on 2B/yr(!) runrate revenue in Q3.
Safe to assume Mirror is growing even faster (PTON doubled YoY up to $1b rr/yr!)
4/ https://www.cnbc.com/2020/05/06/peloton-pton-reports-fiscal-q3-2020-earnings.html">https://www.cnbc.com/2020/05/0...
$PTON reported 66% YoY topline growth on 2B/yr(!) runrate revenue in Q3.
Safe to assume Mirror is growing even faster (PTON doubled YoY up to $1b rr/yr!)
4/ https://www.cnbc.com/2020/05/06/peloton-pton-reports-fiscal-q3-2020-earnings.html">https://www.cnbc.com/2020/05/0...
(meanwhile, gyms are failing, organized sports are on ~permanent hold, and people are getting increasingly stir-crazy).
but wait, there& #39;s more good news
5/ https://abc7news.com/24-hour-fitness-closing-gyms-chapter-11-bankruptcy-gym-membership-california/6248701/">https://abc7news.com/24-hour-f...
but wait, there& #39;s more good news
5/ https://abc7news.com/24-hour-fitness-closing-gyms-chapter-11-bankruptcy-gym-membership-california/6248701/">https://abc7news.com/24-hour-f...
PTON has some of the most compelling unit economics of any consumer product (including Apple!)
hardware: 40-45% gross margin
classes: 57% gross margin
AND the subscription class service has ~1% monthly churn; a hypothetical 100 months before churn!
6/ http://seekingalpha.com/article/4355614-peloton-great-unit-economics-and-lot-of-growth-priced-in">https://seekingalpha.com/article/4...
hardware: 40-45% gross margin
classes: 57% gross margin
AND the subscription class service has ~1% monthly churn; a hypothetical 100 months before churn!
6/ http://seekingalpha.com/article/4355614-peloton-great-unit-economics-and-lot-of-growth-priced-in">https://seekingalpha.com/article/4...
So imagine you& #39;re LULU. You see:
* >doubling YoY rev growth
* >100M revenue run rate
* ~40% gross margin (comparable)
* customer churn measured in YEARS
* AND a massive opportunity to copromote/cross sell with your eCom + retail footprints
You could justify >2x what they paid
7
* >doubling YoY rev growth
* >100M revenue run rate
* ~40% gross margin (comparable)
* customer churn measured in YEARS
* AND a massive opportunity to copromote/cross sell with your eCom + retail footprints
You could justify >2x what they paid
7
fun postscript: PTON makes ~20M year in branded apparel revenue, and it is (somewhat) of an afterthought for them. Imagine what LULU could do with its many SKUs, strong brand, many opportunities to crosssell, etc
Congratulations to Team Mirror & LuLu CorpDev!
Congratulations to Team Mirror & LuLu CorpDev!
double postscript: they launched from stealth at TC Disrupt in Sept 2018. Fast forward less than 2 years, they sell for $500M. A true testament to the incredible growth of consumer DTC
