While researching emerging companies, FLY-E Group, based in Queens, NY, caught my attention due to its specialization in smart electric motorcycles and e-bikes. If you’re in a city, especially NYC, you’ve likely seen their distinctive “fly wing” logo on e-bikes used by delivery drivers zipping through traffic. These fly wing e-bikes are becoming increasingly common for gig work and personal transportation.
Fly Wing E-bike in NYC
FLY-E Group (“FLYE”) is classified as an emerging growth company, which means they operate under less stringent SEC IPO regulations. This includes reduced financial disclosure requirements, which investors should be aware of. For example, they only need two years of audited financials and have exemptions on certain executive compensation disclosures. Until FLYE reaches $1.235 billion in annual revenue, information is somewhat limited, requiring careful consideration.
Despite being a relatively small company, founded in 2018, FLYE has shown impressive performance. They generated just under $22 million in sales and, notably, are already profitable – a significant point for a company going public. This IPO might be particularly interesting for investors seeking exposure to the growing e-bike market. Let’s delve into FLY-E based on their S-1 filing and explore the potential investment appeal of this company known for its fly wing e-bikes.
Understanding FLY-E and Their Fly Wing E-bikes
Simplicity is key when evaluating businesses. FLY-E’s model is straightforward: they design, assemble, and sell electric motorcycles, e-bikes, and mopeds. Their fly wing e-bikes have become a familiar sight, especially among food delivery drivers in urban areas.
FLY-E Product Lineup
Interestingly, FLY-E assembles their fly wing e-bikes in leased spaces in New York. They source components from both China and the United States, with a current split of 55% from China and 45% from the U.S. as of September 2023. This is a shift from FY’22, where 80% of components were sourced from China, indicating a move towards diversifying their supply chain.
Their product range is extensive, featuring 21 e-motorcycle models, 34 e-bike models, and 12 e-scooter models, catering to various needs and price points. These fly wing e-bikes and other products are sold and serviced through 39 retail stores across 6 states (NY, TX, DC, CA, FL, and NJ) and one location in Canada. In addition to their retail network, FLY-E also utilizes wholesale dealers to expand distribution.
Sales Channels: Retail vs Wholesale
Customer sentiment towards FLY-E stores appears positive, based on online reviews and store visits. While online ratings are limited, a review of their listed stores reveals generally favorable feedback. This positive customer reception suggests a solid foundation for their fly wing e-bike brand and overall business.
Customer Ratings for FLY-E Stores
Financial Performance and Growth of Fly Wing E-bikes
FLY-E’s financial performance is noteworthy. In the last fiscal year (ending March), the company generated nearly $22 million in revenue with a healthy 10.6% operating margin. This profitability is particularly impressive for a company undergoing an IPO.
FLY-E Revenue and Operating Margin
This represents a 26.7% year-over-year revenue growth rate and a 700 basis point margin expansion. Looking at the first six months of FY’24, revenue growth accelerated to 38.6% year-over-year, although with a slight 100 basis point margin decline. This continued growth trajectory indicates strong demand for their fly wing e-bikes and related products.
Initially, revenue growth in 2023 was primarily driven by a significant increase in average sales price (ASP), up 46.1% to $941. However, more recently, volume growth has become a key driver. In the first six months of FY’24, EV volume increased by 56.9%, with a much smaller ASP increase of $50. This suggests a healthy balance of price and volume growth, indicating sustained market interest in fly wing e-bikes.
Management notes that demand currently exceeds their production capacity, prompting the search for a larger assembly facility. This is a positive challenge, signaling strong market demand for their products and the potential for future growth as they scale production of their fly wing e-bikes.
Vendor Relationships and Supply Chain for Fly Wing E-bikes
Supply chain management is crucial in the electric vehicle industry. Currently, 55% of FLY-E’s components are sourced from China. While this exposes them to potential risks related to tariffs and geopolitical factors, it’s not an immediate concern. The company has shown adaptability in shifting vendor relationships over time.
FLY-E's Key Component Vendors
Notably, Fly Wing E-Bike Inc. has become a top vendor for FLY-E. The fact that FLY-E is sourcing from a vendor with “Fly Wing E-Bike” in its name suggests a potentially deeper strategic relationship. It could indicate FLY-E might be exploring opportunities to also sell components or collaborate further with this vendor in the future. This vendor shift highlights management’s proactive approach to optimizing their supply chain and ensuring quality control for their fly wing e-bikes and other products.
Insider Ownership and Management Commitment
A significant positive aspect of FLY-E is the high insider ownership. CEO Zhou Ou (Andy) holds a substantial 35% ownership stake, demonstrating strong alignment with long-term company performance. The remaining equity is distributed among only five other individuals, with no institutional or fund ownership prior to the IPO.
FLY-E's Shareholder Structure
The founders’ commitment is further evidenced by their personal financial contributions to the company’s early stages. Andy and his partners funded the business through personal loans, highlighting their dedication. Andy himself even drew a modest salary, underscoring a focus on building the company rather than personal enrichment. This level of insider commitment and ownership is a strong indicator of long-term vision and dedication to FLY-E’s success in the e-bike market.
Healthy Balance Sheet
FLY-E’s balance sheet appears to be in solid condition. The company has strategically used borrowing to fuel growth, invest in inventory, and manage loan payables.
FLY-E Balance Sheet Highlights
FLY-E Loan Payable Details
While lease obligations seem substantial, the vast majority (94.7%) are right-of-use (ROU) assets with staggered maturities. Given FLY-E’s profitability, their balance sheet does not present immediate concerns, providing a stable financial foundation for continued growth in the fly wing e-bike market.
Growth Opportunities Beyond Fly Wing E-bike Sales
While FLY-E’s primary revenue stream is from e-bike and component sales, they are exploring avenues for recurring revenue. They are developing a mobile app to offer management services for their EVs, including features like GPS, navigation, battery management, online shopping, and anti-theft functionalities. While the impact of this app on revenue is uncertain, it represents a potential value-added service for fly wing e-bike owners.
Another growth initiative is the “Fly E-Bike Care” program, essentially an insurance policy offering extended maintenance services beyond warranties. This program aims to provide broader coverage, including accidental damage, and will be integrated into their app with maintenance reminders. The success of this insurance offering remains to be seen, especially considering the usage environment of many fly wing e-bikes in demanding delivery services. However, it represents an attempt to create additional revenue streams and enhance customer loyalty.
IPO Deal Dynamics and Valuation
FLY-E is aiming to raise $17 million through their IPO, although the share offering details and pricing are yet to be finalized. The intended use of proceeds includes inventory and production costs, retail store expansion, technology and R&D, and working capital.
Based on current sales and profitability, and applying a 3-4x sales multiple, FLY-E could potentially command a market capitalization of $100 to $130 million post-IPO. This valuation range suggests a potentially attractive entry point for investors interested in the electric mobility sector.
Reasons for Investor Interest in FLY-E and Fly Wing E-bikes
FLY-E presents a compelling investment opportunity for several reasons:
- Strong Insider Ownership: High insider ownership aligns management’s interests with long-term shareholder value.
- Profitable Growth: The company is achieving rapid revenue growth while maintaining profitability, a rare and attractive combination.
- Market Expansion Potential: Significant whitespace exists for expansion into other urban centers and international markets, particularly in Latin America, for their fly wing e-bikes.
- Positive Customer Reception: Solid customer reviews for retail locations and proactive response to feedback indicate customer satisfaction and brand building.
- Value Proposition: Focus on offering diverse e-bike options at competitive prices.
- Future Service Expansion: Potential for growth through ancillary services like battery charging/swapping infrastructure.
These factors combine to make FLY-E, and their recognizable fly wing e-bikes, an interesting IPO to watch. The company’s focus on the growing urban electric mobility market, combined with strong fundamentals and growth potential, warrants attention from investors.
Animated Fly Wing Logo
This analysis provides an initial overview of FLY-E Group and its IPO prospects. Further updates and a finalized S-1 will provide a more comprehensive picture for potential investors.
Until next time,
Paul Cerro | Cedar Grove Capital
Personal Twitter: @paulcerro
Fund Twitter: @cedargrovecm
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