Interactive Strength Inc. (NASDAQ:TRNR – d/b/a/”FORME”) operates a digital fitness platform that combines premium connected award-winning fitness hardware products with 1:1 personal training and coaching (from real humans) to deliver an immersive experience and better outcomes for both consumers and trainers. Management believes that TRNR is the pioneer brand in the emerging sector of virtual personal training and health coaching. Moreover, this approach accelerates a powerful shift towards outcome-driven fitness solutions. It is part of a growing group of emerging companies that seek to leverage the Internet to provide users with a gym like experience within the comfort of their homes, however TRNR is differentiated with a virtual personal training offering and business model that capitalizes on time-zone efficiency. The Company recently announced the signing of an LOI to acquire a profitable, growing connected fitness business, which could dramatically changes outlook, revenue, profitability, and valuation for TRNR. The acquisition expected to close by the fourth quarter of 2023.
FORME has created an award-winning all-in-one connected hardware smart home gym (FORME Studio and FORME Lift) designed to connect people 1:1 for the first time with real, elite personal trainers in all areas of fitness and wellness, including personal training and specialized sport instruction, nutrition, sleep, mindfulness, and injury rehabilitation. FORME is differentiated as the only company to offer live 1:1 and asynchronous coaching memberships from the industry’s highest quality personal trainers. FORME has hired a team of world-class trainers in the fitness and wellness industry. The FORME Studio, FORME Studio Lift received design awards from multiple smart home gym awards in 2023 from major fitness publications, including Men’s Health, Shape, and Good Housekeeping. The Company’s management includes industry leaders who bring strength in finance and fitness: Trent Ward, Chief Executive Officer, who had a successful career in finance having worked at Citadel, Deepak Mulchandani, Chief Technology Officer, who was on the management team of Peloton.
The acquisition deal is expected to further expand the firm’s product channels, and add the lucrative business to business (B2B) to the existing business to customer (B2C) model. Interactive Strength Inc. (NASDAQ:TRNR)’s management believes that the deal will enable the firm to cross $10 million in revenue this year and more than double this by 2024 to cross $25 million. These mark significant gains when consider the fact that the firm’s revenue for 2021 and 2022 sits at $323,000 and $681,000, respectively – with 2021 being the first year in which Interactive Strength Inc. (NASDAQ:TRNR) made sales.
In terms of profitability, while 2022 saw it nearly double its revenue, Interactive Strength Inc. (NASDAQ:TRNR)’s direct production costs, or the cost of sales, nearly doubled as well since they grew from $5.1 million to $9.5 million during the time period. To boost its total addressable market, the company is expanding its B2B offerings significantly, as it announced at the start of August that it will partner up with a real estate firm to generate recurring and stable subscription revenue. This firm is The Risher Companies, which provides fitness consulting and fitness equipment sourcing for multi family properties, real estate firms, and other companies. It already has a wide portfolio of equipment and brings on the table expertise and industry trust that can provide Interactive Strength Inc. (NASDAQ:TRNR) an entry into the lucrative B2B fitness segment.
Crucially for Interactive Fitness, its acquisition will offer the firm a chance to accelerate the path to profitability. Companies often take years to turn their revenue and net sales into positive operating income and earnings per share for investors, as the costs of setting up a business and then running a well oiled machines are the greatest in the early days of a firm’s operations. Interactive Strength Inc. (NASDAQ:TRNR)’s management believes that the acquisition will allow it to reach adjusted operating income profitability by the fourth quarter of 2024 and generate a positive cash flow by that time as well. Cash flow is an important metric for any company, whether small or large, since it measures the true amount of money that is available to shareholders after the costs of business are accounted for.
Of course, since Interactive Strength Inc. (NASDAQ:TRNR) has signed a letter of intent only, it can pull out from the deal at a later stage. To conserve working capital, the deal will see the shares of the target company exchanged with TRNR shares with a lockup period of October 2024.
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