E-bike company Cowboy aims for full-year profitability next year

Belgian electric bike maker Cowboy is expected to hit a full-year profit in 2024 even as some of its market rivals suffer financial hardship.

Adrien Roose, Cowboy’s CEO and co-founder, told CNBC that he expects the company to reach profitability on an EBITDA basis by the end of the second quarter and then maintain it through the third quarter. EBITDA refers to earnings before interest, taxes, depreciation and amortization.

By the third quarter, Cowboy would then have reached a full-year profit, according to the company’s boss.

“There is some seasonality in this business,” Roose said in an interview. “Basically, people like to buy a lot of bikes in the summer, and not nearly as much in the winter. “

However, he said, “We have a high level of confidence that by 2024, we will be EBITDA profitable and cash flow positive throughout the year.”

EBITDA is a traditional measure of profitability for many technology companies.

Cowboy is a startup that designs electric bikes. It has been called the “Apple of e-bikes” in the past because it integrates smarts software in its bikes.

Cowboy connects its bikes with an app that allows users to lock them when not in use, track their location, predict battery depletion and receive weather updates.

Cowboy will also be the designer of the bikes rather than the manufacturer – it gets other companies to handle its bikes, similar to how Apple relies on contract manufacturers like Foxconn to make its iPhones .

But e-bikes have had a tough time in the market lately.

A shift in supply chain dynamics has led to a situation where e-bike stock levels are now plentiful at many manufacturers but demand has dropped significantly since the pandemic surge.

That’s different from when e-bike companies were scrambling for more units in 2021 when consumers were looking for sustainable alternative forms of transport and a way to get out during the Covid lockdown.

During that time, their orders were often delayed because companies could not keep up.

“By the time this traffic started to normalize, the world was already moving to get into a very different place,” said Roose. “Towards 2022 and 2023, there was a complete slowdown in demand. “

“This has created the perfect storm for companies that have over-ordered and are now faced with demand that is slightly lower than expected or expected, and that immediately translates into very high inventory levels, shortages of money, and lack of liquidity. “

The e-bike industry has recently been marred by bankruptcies of major players in the space. In July, Dutch e-bike company VanMoof filed for creditor protection. Administrators overseeing the bankruptcy process are exploring several options for VanMoof, including a possible sale of assets to a third party so it can continue to operate.

Finnish e-bike company Revonte also filed for bankruptcy and said it is selling its intellectual property.

Roose said that his company is unlike competitors because it does not manufacture its own bikes and therefore has a leaner cost line.

With some competing e-bike companies, “the cost base was too high for their size,” Roose said, adding that VanMoof employed far more employees than Cowboy despite revenue levels. similar.

Cowboy launched its new Cruiser e-bike with an upright seating position – known as the “Dutch” riding position – earlier this year.

The bike is intended to give riders “a better position and more visibility on the road”, according to the company.

But at an “introductory” price of $3,490, Cowboy e-bikes don’t come cheap. And on August 1, the company raised the prices of its belt-driven “Performance” configuration bikes to $3,790 from $3,490.

E-bike companies are forced to be more aggressive in terms of pricing as the flood of venture capital that fueled the industry in 2020 and 2021 has exited the market with interest rates climbing higher.

However, Roose said he is keeping a close eye on the long-term potential of e-bikes – driving sustainability with fewer cars on the road – rather than the short-term market outlook. -time.

“Demand for e-bikes in general is very strong and has been growing year-on-year,” Roose said. “In 2023, there has been a slight slowdown, but the -medium and long-term demand for micro-mobility in general is as strong as ever and we are very supportive.”

Revenue is up 38% year-over-year for Cowboy’s best-selling models, and its operating costs have fallen 19% year-to-date.

Roose said the company has also increased its margin to 40% – no mean feat for a hardware company – and reduced its loss by 83% this year.

The company secured 13 million euros ($14.1 million) in additional funding from existing institutional backers and crowdfunding investors in April.

The e-bike market is expected to reach $119.7 billion by 2030 at a compound annual growth rate of 15.6% from 2023, fueled by rising crude oil prices and a shift towards environmentally friendly modes of transportation, according to Fortune Business Insights.