Cycling Industry News reports that Wahoo is facing cashflow troubles and has had its credit rating cut from CCC to -CCC by S&P Global Ratings. For those of you who have not watch a Netflix documentary about economic meltdowns, this means that S&P Global Ratings now considers Wahoo to be less likely to be able to meet its debt repayments than before.
Cycling Industry News states that S&P wrote in its summary: “Wahoo’s capital structure is unsustainable given its negative EBITDA and cash flow. We assess the company’s liquidity as weak because its liquidity sources are insufficient to cover its cash needs over the next 12 months. Wahoo had minimal cash on hand and no availability under its revolver as of the end of 2022 after funding its quarterly interest and mandatory debt amortization payments. Further, we expect its operating conditions will remain pressured over the next few months as it laps the COVID-related demand tailwinds it benefitted from last year. This will lead it to generate negative free operating cash flow (FOCF), which, along with the higher interest expense on its floating-rate debt, will likely lead to a near-term liquidity shortfall. We forecast Wahoo will also violate its consolidated total net leverage covenant, which became effective as of Dec. 31, 2022, adding to its default risk in the first half of 2023.
“Wahoo’s operating performance continues to deteriorate amid the weakening macroeconomic environment as consumer spending shifts toward non-discretionary categories.”
Wahoo makes a range of sports equipment, including watches, bike computers, and indoor trainers. Its Wahoo X indoor training app with virtual races and routes is currently £135 a year, and incorporates the Sufferfest features that the company bought in 2019.
Following a huge boom during Covid, indoor training platforms are finding the market tough going. Wahoo bridges the indoor and outdoor market however – will this be enough to keep it afloat?
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