EXCLUSIVE: Icon, the profitable $7 billion maker of NordicTrack, is hiring banks for a 2021 IPO as it takes on Peloton


Icon Health & Fitness, owner of the NordicTrack brand of exercise equipment, has asked banks to pitch for roles in an initial public offering next year, according to two sources who spoke to Business Insider. 

The Peloton competitor is aiming to go public in late 2021, said the sources who asked not to be identified because they were not authorized to publicly share information. A company spokesperson declined to comment on the IPO timeline.

Icon last raised $200 million from investors including the private equity firms L Catterton and Pamplona Capital Management in October at a valuation of more than $7 billion, Bloomberg's Gillian Tan reported. The company has raised about $398 million since it was founded in 1977, according to PitchBook.

The company is best known for its NordicTrack line but also owns other brands that sell workout machines, including ProForm and Freemotion. Last month, Icon also added The Vault, a Mirror-like interactive and reflective gym that starts at $1,999. 

Headquartered in Logan, Utah, Icon employs about 2,000 people in 14 locations, including warehouses in Ogden, Utah, and sales offices in Melbourne, Australia. In addition to hardware, Icon also operates iFit, a streaming platform that automatically adjusts equipment to match the trainer's workout. iFit currently counts over 1 million paid subscribers and 4.5 million members.

The pandemic year has brought on major growth in the at-home fitness market as gyms across the U.S. remain closed due to stay-at-home orders. Startups like Tempo and Tonal have both raised multiple rounds of funding this year. In June, Mirror, was acquired by Lululemon for $500 million. Last week, Peloton announced that it was acquiring Precor, one of the world's largest suppliers of commercial fitness equipment, in a deal worth $420 million.

"Both NordicTrack and Peloton benefited from excess demand during the pandemic so the challenge for 2021 is for both to generate more revenue per customer and to find new customers in a post-COVID world," said Laura Martin, senior analyst at Needham & Company.

Icon was already seeing a 40% growth rate prior to the pandemic, but business has accelerated as customers stayed home to work out. Unlike some of its competitors in the connected fitness category, Icon is profitable and posted revenue of $1.5 billion in the 12 months through December, up from $1 billion in revenue three months ago, the company said.

"We've been in business for over 40 years, and we've seen a lot of ebbs and flows in business cycles," said Watterson in an interview with Business Insider. Fitness has been "one shining light to the darkness of COVID," he added.

NordicTrack Vault
NordicTrack Vault
ICON Health and Fitness

Despite securing a valuation north of $7 billion and reaching profitability, Icon sees the rise of the nearly 9-year-old Peloton as one of the biggest threats to its business. Peloton shares have surged about 436% this year and revenue spiked 232% year-on-year last quarter to $758 million. The base price for a Peloton stationary bike is $1,895 while the ProForm Studio Bike Pro 22, the exercise bike that most closely resembles a Peloton, starts at $1,499.

Two months ago, Icon sued Peloton for patent infringement. In the complaint, Icon said Peloton CEO John Foley traveled to Icon's headquarters in Logan, Utah, in the summer of 2013 "seeking an opportunity to use Icon's patented technology." 

Icon said the meeting occurred before Peloton's bike design was finalized and Foley was "warned at that meeting and subsequent meetings against infringing Icon's patents," according to a copy of the lawsuit obtained by Business Insider. Foley took the company public about six years after that meeting.  

When asked about the lawsuit, Watterson said he's "highly confident" in the 350 patents that Icon currently holds. "We deserve the right to own the keys to our house and to invite people in at our option," he said.  

The two companies have locked horns before. Peloton sued Icon in May, claiming "Icon set its sights on yet another Peloton innovation — live classes with a real-time leaderboard — and decided that it would copy this aspect of the Peloton experience, as well," said Peloton in the lawsuit.

Peloton did not immediately respond to a request for comment.

"Fitness is somewhat litigious," said Watterson when asked about the on-going cold war with Peloton. Later, he added, "a lot of people like to copy us." 

Yet there's one idea from Peloton's playbook that Watterson is at least considering. In November, Peloton announced a multi-year partnership with award-winning singer Beyonce to help curate classes for the fitness company's subscription service. Shares rose as much as 8.6% after the news of the partnership was announced. 

"If we can do a deal with somebody that will help, of course, we're interested in that and you wouldn't be surprised if that happens in the future with us," said Watterson. 

Peloton
Peloton

A Logan, Utah native, Watterson, 65, described a childhood playing football, basketball, and baseball. After high school, when he was 19, he served as a missionary in Taiwan for The Church of Jesus Christ of Latter-Day Saints. He came back to the US to attend Utah State University, majoring in business with a minor in ChineseHe still speaks Mandarin fluently.  

While a student at Utah State in 1977, he founded the company with Gary Stevenson, a religious leader. In the early days, they sold marble kitchen products and trampolines, switching to treadmills and exercise bikes a few years later. 

Scott Watterson CEO headshot 2015
Scott Watterson, CEO of ICON Health and Fitness
ICON Health and Fitness
In 2003, while running Icon, Watterson and his wife returned to Taiwan to serve as Mission President. Although it was a crucial time for the young company, Watterson was willing to step aside as CEO for three years.

"It's not something you seek out and it's not something you want to do, but you're willing to serve," he said.

Still, the relationships he developed during his years in Taiwan are also serving his business well today.

"We make a lion's share of our exercise bikes there," said Watterson.

Aside from Taiwan, Watterson confirmed the company also does business in Vietnam and Malaysia. Having these deep connections and being able to source parts from various suppliers in Asia has allowed Icon to diversify risks in the supply chain, he said.

It may also prove to be a competitive advantage. Both companies say they source the majority of their bike parts there, but Icon believes, and there's some evidence to prove, it has the upper hand in the region.