Things do not sound good at Wahoo…~15% of the staff was laid off and the financials sound pretty grim.
According to Caley on his new podcast, EBITDA is down 80% YoY, they are over-leveraged and out of cash. More reorganization is likely on the way, too…Sufferfest / WahooX may be on the chopping block next.
Bleak times in the industry…Saris goes through bankruptcy, Zwift just laid off staff, Wahoo suffering financially, etc. Failure to properly plan for a post-pandemic market is likely a root cause for a lot of this…PE got involved, saw a quick and easy payday based on meteoric sales increases, pamdemic eases and everything plateaus (or declines). IN the meantime, massive inventory issues mount as the sudden drop in demand does not match the production pipeline.
I remember when I said, maybe in 2021 or so, that the pace and BS of the bike industry was not sustainable.
The massive fall from grace of Peloton should have been enough to recognize that, but many companies only saw the green pastures… and here we are.
Wonder when the bike manufacturers will start closing the hundred of stores they bought… My guess is mid to late 2023. think Trek was the most aggressive. So they will probably be the first one to do it.
One of the bigger chains here (Rutland Cycles) has sold out to Specialized. I think a few of the Rutland stores are closing and the local one (temporarily closed) has already been sold on by Specialized to become a Giant Concept Store :-/
I worked at the Rutland Warehouse. When Spesh took over they made around 65% of the workforce redundant and as you said closed/are closing around half the stores all in the hope of making the business operate at a profit again.
This helps frame the Zwift suit a bit as well, with respect to the threat to their revenue that the Hub trainer presents. Right or wrong from a patent perspective, it may well have been a ‘necessity’ in order to have some sort of financial future. All well over my head, but it all paints a bit more of a picture.
It even sounds a bit like what may have been the state of Saris from my limited understanding. And it reinforces the frequency and depth of sales we’ve seen for their gear too.
Spot on with both points, Chad….I meant to make the same point re: the Zwift lawsuit in my original post.
My guess now is that it is as much about a financial lifeline as it is about protecting their patents.
Reminds me a bit of SRAM in the late 90’s when they sued Shimano over their OE pricing policies…the company was in their deathbed and the lawsuit not only helped break up Shimano’s pricing policies, it gave them a massive influx of cash.
After all the flack that the TR leadership team got by not selling/partnering with Zwift in 2021, I’m wondering if they matrix dodged a bullet. Rather than over extending themselves and loosing control of the direction they were methodical with the strategy around machine learning and seem well positioned for future growth.
I see so much potential for WahooX and I loved the quirky sufferfest videos (I remember the days when you would pay for a .MP4 download). It would be sad to see that business go sideways. The entertainment side of WahooX and integrated yoga/strength training + Adaptive training and AI FTP detection would be my dream exercise plan.
Interesting take. I was actually thinking about this today too. I was thinking about how long it has taken to get to 2.0 and wondering if we would have 2.0 out faster or slower as a result of a pairing with Zwift. There probably would have been a massive cash influx, but would it have pushed everything in a totally different direction?
15% layoffs in the current environment isn’t too bad, and being over-leveraged is survivable if you can maintain revenue without further borrowing. Running out of cash would be disastrous, of course. My guess is Wahoo has been too aggressive on the acquisitions. All these companies had to know the pandemic windfall would come to an end, but I guess it’s hard to not get exuberant when the cash is rolling in.
Wahoo has had its debt rating downgraded, so the financial data isn’t entirely rumors.
Going by what Caley said on his podcast, this is coming from the financial institution that ranks a companies ability to get credit. Just like your personal credit score doesn’t really tell the whole picture, if your score was 600, getting loans becomes a bit challenging.
Obviously don’t know the inner workings of TR, but it certainly looks like they had some foresight to just chug along, business as usual, rather than make a quick cash grab, and I’m super thankful for that!
Hope wahoo makes it out alive! Save for the tickr hr strap, I love pretty much everything they offer!
In fact, that’s exactly what’s in some of the more recent lawsuit filings from them. They’ve got declrations from half a dozen bike shops showing the financial impact of the Zwift Hub to KICKR sales, along with starting to paint the picture of what happens to their financials in 2023 if the Zwift Hub is permitted to keep being sold. Unfortunately, the next line of that paragraph is then redacted.
Also redacted to public view are further Wahoo financial bits in that same filing that covers the concern that they have. However, the filings do include two different creditor reports, and one of them notes that Ch. 11 is a very significant possibility.
All that said - as I’ve noted recently, some of this is Wahoo’s own doing. They’ve got numerous products that they’ve let just languish:
KICKR Desk: This came out in 2015, and has received zero updates. Other companies have added power, they’ve added wheel locks, they’ve added water bottle holders, they’ve made it lighter, they’ve made it cheaper. They’ve done everything. Unquestionably, Wahoo’s product is just about the worst of the bunch now, yet, it’s by far the most expensive. The others are 1/3rd to 1/2 the price, and far better functionality speaking. This is gravy money for Wahoo. People will still pay the silly $250 for a Wahoo branded desk, if it was at least competitive. But it’s not. So instead, people pay $60-$120 for a 3rd party desk that’s better. This isn’t rocket science, upgrading these products isn’t hard. There’s no firmware, no software upgrade cycle. It’s dead easy compared to everything else they do.
The Fan: Again, a product that people love and love to pay $250-$300 for. But in that time we’ve seen Elite launch their fan which features adjustability, and we’ve seen other non-sport companies get in and launch cardio versions of their fans too, at the same 1/3rd or less price points and all with adjustablity. Why hasn’t Wahoo dove in and either added more features to their fan (adjustability), or, made a KICKR Fan Jr. Edition that cost $125.
Wahoo KICKR CORE V2: This is now 4 years old, and while still a great trainer, the writing was on the wall when JetBlack started selling the VOLT to OEM’s that were pricing it at sub-$500, even before Zwift came along. That was a few years ago. The writing was also on the wall when Elite did the same with the Zumo at $599 at launch in 2019. This (CORE) is the trainer that’s at the epicenter of Wahoo’s suit, and yet, even before the Zwift Hub it was starting to be overtaken by offerings from Saris/Elite (Tacx didn’t really do anything here that meaningfully competes). Wahoo should have either lowered the price to drive sales, or, found some way to increase the reason to buy it.
And all of this ignores the mostly half-hearted attempts lately in the bike computer realm, with Hammerhead now easily beating them in feature additions and existing functionality.
Look, I like Wahoo as a company, and I like what they’ve done over the last decade. There’s a lot of good people there too, from top to bottom. But ultimately, as a business, they have to innovate and they have to be competitive as pricing changes. By and large, the last few years, they’ve done neither - and as a result, competitive has come in and eroded their base.
(Funny side note: Wahoo today filed to have all filings kept under seal in the trial, including going back and removing existing ones. The judge approved.)
I never realized how many of their products haven’t been updated/upgraded!
I’ve owned all of their computers from the RFLKT up to the Roam (no V2 bolt or their latest version of the Roam) and really liked them. I don’t have a GPS now, so I’m in the market and Wahoo certainly falls from top consideration at this point.
I must be the only person in existence who liked the Wahoo HR? I’ve had the same one for years now, maybe 5 or 6, and I’ve only replaced the battery and the strap.
Not sure how they can continue to survive. I’m questioning their overall leadership in terms of the decision making which has resulted in unsustainable development. They’ve left software to languish on their hardware platforms. Over production and miss-predicted market shifts is one of many issues. I wonder how much their investments in their online platform WahooX+RGT have reduced their ability to staff device software development.
It kind of smacks as desperation. How can Wahoo sue an online service like Zwift for being competitive by offering a compelling hardware accessory at a competitive price? So what? Zwift doesn’t owe Wahoo anything unless this suit is based around some sort of contract. What if Zwift had been selling rebranded Saris H3s at ridiculously low prices instead of Jet Black? Would Wahoo still have sued?
I mean Wahoo needs to get their house in order and bankruptcy seems like the most viable option in addition to losing their current leadership.