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YogaWorks (YOGA) IPO


In one of the classic episodes of Seinfeld, Frank Costanza repeatedly screams out, Serenity Now! Such desperate cries were never answered. Perhaps Frank needed a session or two at YogaWorks, one of the largest and fastest growing yoga studios in the country.

Last year almost 3 million students paid $55 million to YogaWorks in 50 company owned studios. They also have a presence online MyYogaWorks.com.

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. YogaWorks 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).

YogaWorks helps people improve their physical and mental well being through the 5,000 year old tradition of yoga, using a community-oriented experience. 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 offers a variety of class options ranging from rigorous physical exertion to classes that provide a deep stretch that is low-impact. Yoga practitioners believe that healthy physical strengthening and stretching combined with meditation can lead to a feeling of centered positivity and relief from stress.

YogaWorks 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 startup company. 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.

YogaWorks past the sniff test with three well respected Wall Street underwriters that include Cowen, Stephens and Guggenheim Securities. If these firms are willing to co-manage an offering of only about $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 already a student of Yoga, then the brand YogaWorks is probably well known to you and your friends. 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. In the final analysis, the business of Yoga is 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 neither: Serenity Now!