Wahoo – Does it have a future? Now it’s Liquid & Debt Free

Wahoo ELEMNT and KICKR owners can breathe a huge sigh of relief as the company is no longer heading for bankruptcy. Whilst your devices would still have worked should the company have gone bankrupt the ecosystem would have been turned off, bugs not fixed and new features not added.

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Quick Background

I first got a whiff of the problem when Wahoo’s PR agent unusually asked me to write more content about Wahoo X, the training platform. Initially, I assumed it was because that particular service wasn’t doing too well. It soon transpired that Wahoo had indeed faced the same boom and bust issue of hardware sales through Covid that many of its competitors also faced.

Rumblings that the company was running out of money because of the debt it had to service were true but the threat of bankruptcy and closure just simply would never have happened to a company with a market position as good as Wahoo’s. Someone was always going to jump in with some cash.

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The issue was always going to be how any ‘rescue’ deal would hinder the company going forward, especially if the new owners had unrealistic expectations and plans.

The fallout is that Wahoo’s founder, Chip Hawkins, partnered equally with 3 others to buy back the company, which is now said to be debt-free and with cash in the bank.

The successful recapitalization of the business provides the flexibility we were seeking as a management team to allow for investment in innovation and growth from the company’s substantial base and category leadership position, by diversifying the breadth of its offerings to better support athletes and fitness enthusiasts.  Wahoo’s management team is energized by a renewed focus on delighting its customers and continuing Wahoo’s mission of building a better athlete in all of us. [Chip Hawkins, Founder]

The investment from both new and existing investors is a clear sign of confidence in the strength of Wahoo- specifically our team, brand, strategy, and powerful ecosystem of innovative products, software, and services. This could not have happened without months of hard work from and support from our channel partners. We want to thank our supply chain and retail and distribution partners for their trust and confidence as we navigated to a successful conclusion to this process. [Mike Saturnia, CEO]

Does Wahoo have a Future?

There are vast numbers of people cycling, running and triathloning. The market in its widest, global sense is growing and will likely do so for years to come. Positive cashflow and profit are never easy to come by and today’s wider business problems are many, some of the more significant ones for Wahoo include: de-coupling from China; inflation; recession; increasing competition; and difficulties in meaningfully adding new software value to its existing hardware tech.

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Anecdote: In the UK I see VERY MANY people with Wahoo bike computers and KICKRs, and those I know are all highly satisfied with the product. Against that, I have never seen another Wahoo Rival watch in the wild and I have only ever seen two SRAM/Hammerhead Karoo 2 bike computers.

Wahoo’s ‘problem’ is that its core business of mainstream indoor trainers and bike computers has products that are as good as they need to be to match athletes’ true needs. The products are reasonably featured, and highly functional because of their ease of use. At a simple level, Wahoo just has to sell more of them which involves eating into Garmin’s head unit share and maintaining its share of indoor trainers, perhaps doing that better in new geographic markets. However, Garmin certainly won’t go down without a fight and many customers prefer its plethora of features and arguably prettier looks. It’s also not getting easier to encourage consumers to have their own personal sports tech ecosystem provided by multiple companies rather than one behemoth.

Turning indoors, the long-term market position is probably OK but in the short to medium term demand was overfilled by Covid. Another strategy for Wahoo is thus to increase margins by shifting more Wahoo X subscriptions (hence the PR company’s call), after all that’s a product with a marginal cost of production that’s close to zero…each extra subscription is (potentially) highly profitable.

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I suspect Wahoo’s ‘Just Works’ and ‘Ease of Use’ are enough to give it a future. Those two factors tend to always pan out well for the companies that have them. So I think Wahoo’s challenge is to grow steadily and conservatively and manage the cost side of the business to underpin that kind of growth based on 3-5 year product ownership cycles that many people seem to have. Keep a base level of brand awareness and let happy customers do the selling.