Speaker 1: These is Bloomberg business Week with Carol Messer and Tim
Speaker 1: Steneveek on Bloomberg Radio. Well, each fall, Bloomberg Pursuits does
Speaker 1: a ski takeover. They highlight where to ski and what
Speaker 1: gear to use for the upcoming season. So in last
Speaker 1: season's takeover, we sent BusinessWeek contributor Gordy Megros to try
Speaker 1: out some skis from a new company called Peak Ski Company,
Speaker 1: based in Montana, co founded by ski racing legend Body Miller.
Speaker 1: So here's what Gordy wrote after spending all day on
Speaker 1: the skis, Carol, Typically skis require a certain amount of
Speaker 1: speed and pressure to engage the tip and initiate the turn,
Speaker 1: but these carved without having to apply that force at
Speaker 1: speed on the steeps, they held the turn like a
Speaker 1: race ski, and in bumps and slush they were quick
Speaker 1: and forgiving. Not once did I feel off balance. He continued,
Speaker 1: anybody could use these skis. Beginners would love them because
Speaker 1: they're easy to turn. Experts would too because they still
Speaker 1: can ski aggressively and feel solid underfoot.
Speaker 2: It's a great feel of what these two gentlemen are
Speaker 2: up to. So let's talk more about the skis with
Speaker 2: the co founders of the company, Andy Worth and Body Miller.
Speaker 2: Andy also CEO and President of Peak Ski Company. He
Speaker 2: joins us from Bozeman, Montana. Body, by the way, of
Speaker 2: course you know him, Olympic and World Championship gold medalist
Speaker 2: many times over and the chief Innovation officer at Peak
Speaker 2: Ski Company. He joins us on zoom from Big Sky, Montana. Guys,
Speaker 2: so great to have you here with us. Body, let
Speaker 2: me start with you. How did this all come together
Speaker 2: to create Peak Ski and why did you want to
Speaker 2: do it?
Speaker 3: Well, I've been obviously in skiing since since I was
Speaker 3: grow a little and had exposure to a lot of
Speaker 3: different companies. Started on K two, Ben Fisher, then Rosenhold
Speaker 3: and Atomic, then Head for eight or ten years.
Speaker 4: So being in the race rooms and seeing.
Speaker 3: The economics of the way the ski companies worked and
Speaker 3: the challenging aspects of the construction methodology was kind of
Speaker 3: frustrating for me. It's pretty, it's pretty, it's pretty analogue,
Speaker 3: and they're sort of stuck in a lot of ways.
Speaker 3: We didn't really change much in the ski world. We
Speaker 3: were changing skis all the time, prototyping, but just watching
Speaker 3: what was happening in the consumer market, and then sort
Speaker 3: of understanding the business model of you know, those companies.
Speaker 3: As I was with them, it was it seemed really
Speaker 3: unlikely that I would go into the hard goods side
Speaker 3: of the business. I know Andy felt the same way.
Speaker 3: We both kind of came into this as skeptics or contrarians,
Speaker 3: but as we dove into it a little bit more.
Speaker 3: I mean, I always wanted to bring better skis to
Speaker 3: the consumer market. There's a big gap between World Cup
Speaker 3: skis and the rest and World Cup skis, granted, are
Speaker 3: specifically designed for racing and hard snow, really.
Speaker 4: Smooth, you know, perfectly.
Speaker 3: Prepared hills, which obviously wouldn't apply as well to your
Speaker 3: consumer just because the hill's always a little messed up
Speaker 3: puffs of snow and nothing is manicured like we get
Speaker 3: in World Cup. But my goal was to bring really
Speaker 3: good skis to the market. And then as I sort
Speaker 3: of Andy and I evolved through this, I had a
Speaker 3: connection with a company in Germany, a good friend of mine,
Speaker 3: and I'd always wanted to sort of modernize the manufacturing process,
Speaker 3: and I think I don't know that Andy and I
Speaker 3: would have done it had we just had the model
Speaker 3: of doing what we're doing right now. Which is, you know,
Speaker 3: building skis and selling them direct consumer. It's a it's
Speaker 3: a fine business, but it's the scalability is a little
Speaker 3: bit problematic in this case. The real sort of enticing
Speaker 3: part was re engineering the manufacturing process so that instead
Speaker 3: of forty five minutes to build a ski and it's
Speaker 3: glue and they you know, for those of you get
Speaker 3: don't know, it's a bit like making a sandwich. They
Speaker 3: call it a sandwich construction. It's a lot of different
Speaker 3: layers laid up with blue or pore impregnated with blue,
Speaker 3: and then you compress it and cook it in a press.
Speaker 3: It takes about forty minutes or so right now, which
Speaker 3: is why they've been building skis for next winter already
Speaker 3: right now, because that's how long it takes to build
Speaker 3: a million pairs of skis set. And we have a
Speaker 3: manufacturing process that we're in the in the in the
Speaker 3: Work song where we can build a ski in somewhere
Speaker 3: around ten seconds and no glue, be able to recycle
Speaker 3: it the same machine that it constructs it will take
Speaker 3: it apart and you can retask those materials. So well,
Speaker 3: that was the part that really got us excited. That
Speaker 3: was sort of the why of doing this.
Speaker 1: I want to talk We'll talk. Yeah, I want to
Speaker 1: talk more about that, but.
Speaker 4: I hopefully that's what that's where the home run is.
Speaker 1: I want to bring in Andy Worth here because he's
Speaker 1: a many your veteran of the ski industry, having run
Speaker 1: some huge mountains here in the US Squad Valley for
Speaker 1: many years, worked at Interest before that. Andy, talk about
Speaker 1: the business here and the financing of this. It's a
Speaker 1: little confusing to me about who the investors are and
Speaker 1: who you raised money from and how much money you've raised.
Speaker 1: So give us the details on the business side here,
Speaker 1: and you know the reception that you've gotten from as
Speaker 1: you go out and try to raise money for this.
Speaker 5: Thank you very much for that lead. I didn't I
Speaker 5: should have thought you guys were going to refer to
Speaker 5: Gordy's article on us. We were shippings of that in
Speaker 5: November pleasantly and certainly a respected writer in certainly writing
Speaker 5: for Bloomberg. That's a great lead out Relative to the
Speaker 5: business is body mentioned. We were both retired about four
Speaker 5: years ago. I worked in the private equity world and
Speaker 5: also running a bunch of ski resorts. As you know,
Speaker 5: we came out this business with ventrarian approaches. The understatement
Speaker 5: skeptical in many ways, but after doing a great deal
Speaker 5: of research and realizing that what body had in his
Speaker 5: mind was something that could provide an exceptional product, new
Speaker 5: type of product to the market. And we had these
Speaker 5: strategic initiatives on which we were working and we commenced
Speaker 5: building the company, standing it up so to speak, and
Speaker 5: launched in April last year. And Tom, TOI your point,
Speaker 5: we had established an initial pre cash valuation based on
Speaker 5: pro forma EBITDA on a three year basis and pretty
Speaker 5: contemporary multiples from what I was able to glean from
Speaker 5: other companies. That pre cash valuation was thirteen million small company.
Speaker 5: And then we raised completed an eight million dollar raised
Speaker 5: about oh gosh, three four months ago, so postcash or
Speaker 5: twenty one and in this case we're currently raising funds
Speaker 5: through Republic Capital. This is crowdfunding, basically a safe note,
Speaker 5: and it has our enterprise value at thirty five million.
Speaker 5: The reason being Tom, is the we have a clear
Speaker 5: line of sight now on these strategic initiatives. The core
Speaker 5: of the business are the skis and that's what prompted
Speaker 5: and supports that initial fundraising effort and the valuations to
Speaker 5: which I mentioned that I referred to. In this case,
Speaker 5: we're starting to get a clean line of sight on
Speaker 5: the three strategic initiatives, which include technology integration. It's extreme
Speaker 5: innovation across all levels. But technology integration through peak Locate,
Speaker 5: which is this proprietary device we're inserting in the skis Wait.
Speaker 2: Wait, so we're bloomberg. So we get a little wonky
Speaker 2: about the financial side of it. So it's interesting, So
Speaker 2: do you guys continue along these ways? Is there venture
Speaker 2: capital money also in it? Is the goal to eventually
Speaker 2: go public? Like, how do you do you think about it? Andy?
Speaker 5: Yeah, no, A great question, of course, and not surprisingly
Speaker 5: on this format. But I think really we're focused on
Speaker 5: right now is advancing on these strategic initiatives, and then
Speaker 5: lessons learned in other acquisition environments in my old career
Speaker 5: is we're gonna advance on these initiatives and you can
Speaker 5: get to the point where we can generate substantial value
Speaker 5: for our current investors and investors coming in through Republic.
Speaker 5: In this mechanism, we don't have a you can't speak
Speaker 5: to any exit strategy because we're focused on an execution
Speaker 5: right now. But we know that we can take the
Speaker 5: value of the business right now thirty five million up
Speaker 5: substantially from here.
Speaker 2: Well, it's interesting, but it come on back in because
Speaker 2: Tim and I were talking when we were prepping for this,
Speaker 2: because Tim's a Ski are really into this. Were you
Speaker 2: guys profitable, Like it can be hard to go up
Speaker 2: against the establishment, and you learned a lot about the
Speaker 2: industry and the mechanics and kind of I love what
Speaker 2: you said the economics of the way ski companies work.
Speaker 2: You probably learned a lot about it, which can be
Speaker 2: tough to go against. Though also so I'm just curious.
Speaker 2: Were you guys profitable in the first year? I mean,
Speaker 2: how are you looking for about it? And we've got
Speaker 2: about a minute then we're going to come back and
Speaker 2: talk some more.
Speaker 5: Okay, go ahead.
Speaker 3: The typical sales channel that everyone's locked into is really
Speaker 3: the problem, so Andy and I address that by going
Speaker 3: direct consumer profitability.
Speaker 4: We ended up not.
Speaker 3: Being profitable year one, which you know, was frustrating, but
Speaker 3: also given the nature of startups, was not terribly surprising.
Speaker 3: But the margins are really good when you sell direct. Obviously,
Speaker 3: the margins are much better. You don't have to sell
Speaker 3: two hundred thousand pairs of skis to be breaking even,
Speaker 3: so I mean, Andy, I'll let you fill in. But
Speaker 3: the really positive stuff we took out a year one
Speaker 3: outweighed the fact that we had some quality control issues
Speaker 3: and just I guess you'd call them growing pains.
Speaker 2: Well, and hang on for a second, because we're gonna
Speaker 2: we've got to do some news and we don't want
Speaker 2: you to get cut off, so we're going to continue
Speaker 2: the and get you to weigh in on that aspect
Speaker 2: of the business. When we come back. We're talking with
Speaker 2: Andy Wirth and Body Miller, as we said of the
Speaker 2: Peak Ski company co founders. Andy also CEO, Body also
Speaker 2: chief innovation officer. And there was a great story that
Speaker 2: was written by Bloomberg business Week that really gives you
Speaker 2: details about what they set out to do, what Body
Speaker 2: set out to do, and it is interesting. I love
Speaker 2: when he obviously has learned a lot about the business
Speaker 2: and how they were doing it, and just this idea
Speaker 2: of being able to manufacture much more quickly changes the
Speaker 2: mathematical business.
Speaker 1: And also what skis worked for him when he was young,
Speaker 1: when he was racing. So we'll get into all that.
Speaker 1: Let's get right back to Andy Wirth, CEO and president
Speaker 1: of Peak Ski Company and Body Miller, Olympic and World
Speaker 1: Championship gold medalist and the Chief Innovation officer at Peak
Speaker 1: Ski Company. They join us on Zoom from Montana. Buddy,
Speaker 1: I want to go back to you because I was
Speaker 1: struck when you said after the first year you were
Speaker 1: frustrated about not being profitable. But I mean, it's really
Speaker 1: tough for a startup, and I think the expectation to
Speaker 1: actually be profitable after one year. I mean, look at Amazon,
Speaker 1: for example, it took more than a decade to regularly
Speaker 1: become profitable quarter after quarter. Why were you expecting to
Speaker 1: be profitable after the first year.
Speaker 3: I sort of touched on it in the margins, the
Speaker 3: margins if we'd you know that we we didn't model
Speaker 3: out quite a bit. Andy's a bit of a quant
Speaker 3: and you know, I always like to to sort of
Speaker 3: use all of our experience and knowledge. It didn't feel
Speaker 3: like either of us were very naive coming into this.
Speaker 3: But the margins on our on our product are good,
Speaker 3: and we're selling right in kind of the sweet spot
Speaker 3: of where you know they typically net out for for
Speaker 3: a high quality, you know, small handmade ski company. But
Speaker 3: the challenge was was quality control. It's just it's a
Speaker 3: byproduct of the manufacturing process itself. It's just very inexact.
Speaker 3: You're using materials that have variances to them, and the
Speaker 3: assembly processes is pretty uh, as I said, it's analog,
Speaker 3: and so there's us being direct consumer. We didn't feel
Speaker 3: like we had the latitude to give anything but perfect
Speaker 3: skis to people, so we ended up with a lot.
Speaker 3: I don't know, I think it was close to thirty
Speaker 3: percent of our inventory didn't pass the QC inspection of
Speaker 3: the of the manufacturer. So it wasn't enough snitpicking. It
Speaker 3: was just the reality and that that was way outside
Speaker 3: of our modeling. And you know, that was tough. But
Speaker 3: the great news is we sold. We sold through you know,
Speaker 3: mid ninety percent of the inventory we had, which was
Speaker 3: basically you know above or right ear where we projected.
Speaker 3: So all of our projections that we could control were
Speaker 3: good and that would have led the profitability. The part
Speaker 3: that was the problem was we didn't have the inventory
Speaker 3: to sell to get our numbers. But you know, again
Speaker 3: that's part of the inspiration or the drive to re
Speaker 3: engineer the manufacturing process because everybody wants better stuff, quicker,
Speaker 3: cheaper and more precise, and that's we're sort of delivering.
Speaker 1: Hey, Andy, come on back in here. Because you're building
Speaker 1: this business with Body, I'm wondering where else you can
Speaker 1: go here? Because I know you guys were talking about
Speaker 1: doing a Body Miller ski academy. You end up pulling
Speaker 1: the plug on the Granby Ranch location in Colorado back
Speaker 1: in twenty twenty two. Where else can you guys go
Speaker 1: as a partnership.
Speaker 5: Well, kind of the sky's a limit. As they say,
Speaker 5: we neither of us feel like retired guys nowadays. I
Speaker 5: can tell you that's for darn sure. We come at
Speaker 5: this business and this effort with a great deal of
Speaker 5: passion for the outdoors the mountains, certainly from the ski industry.
Speaker 5: Different angles of attack, but similar ethos and way of
Speaker 5: approaching things. There's a couple of different ventures that we
Speaker 5: have that we're taking on and considering right now. All
Speaker 5: of our emphasis and focuses on Peak, and the primary
Speaker 5: reason being is coming back to this reengineering of the
Speaker 5: entire process by which skis are made that puts us
Speaker 5: in a position to be three four years down the
Speaker 5: road having our machinery process that we with a smile
Speaker 5: on our face. We call a treadstone because it is
Speaker 5: fairly confidential information that we're working with this group in Germany.
Speaker 5: But nonetheless it's it's something that we anticipate be in
Speaker 5: a place where we can have thirty thirty five to
Speaker 5: forty percent of the world's market share made on our
Speaker 5: machines and our process. And that is where when I
Speaker 5: mentioned value creation, that's where it comes into place.
Speaker 2: So does that mean Andy, you'll be making you guys
Speaker 2: will be making skis for other companies, other brands.
Speaker 5: Yes, ma'am. In fact, it might be interested to know
Speaker 5: my best effort at Yogi Bearism is the least important
Speaker 5: thing about our company or the skis, but they're critical,
Speaker 5: and the reason being the skis are critical. But at
Speaker 5: the same time, we're in this to the innovation for
Speaker 5: the innovation on so many different fronts, including the process.
Speaker 4: Right.
Speaker 2: So body, it's like becoming the luxatica of skiing, right, Like,
Speaker 2: you don't care what the brand is, but if you
Speaker 2: can improve the process, that's okay, or being like a
Speaker 2: what is it a founder is talking about?
Speaker 3: Yeah, you're talking about really established companies. But the irony
Speaker 3: is besides attaching and incredible people. Andy and I are
Speaker 3: big fans of many of the companies that we're competing against,
Speaker 3: and in this way, we're not looking to steal market
Speaker 3: share from them, because at a certain point it becomes
Speaker 3: annoying to manage logistics. In this case, our goal is
Speaker 3: to have ten purchase orders and be delivering two million
Speaker 3: pairs of skis, and they advantage that. I think I
Speaker 3: don't see it stopping there because we can deliver them
Speaker 3: for twenty or thirty or forty dollars less than they
Speaker 3: make them for themselves. Now, Plus they can divest of
Speaker 3: all their other sort of liability because even though a
Speaker 3: lot of their equipment's amoritized, they're just understand that there's.
Speaker 4: A lot of fluff there. There's a lot of.
Speaker 3: Loss, and we can we can clean that up as
Speaker 3: well as there's things like gray market skis that you know,
Speaker 3: there's a little bit of the inventory is out of control.
Speaker 3: So I think I don't see it stopping. I can't
Speaker 3: see a company saying, hey, build us these five hundred
Speaker 3: thousand pairs and we're going to build the other five
Speaker 3: hundred thousand for forty dollars more and deal with fifteen
Speaker 3: percent weeks.
Speaker 2: Their accountants or the whole financial team might say, oh wait,
Speaker 2: I mean, let's talk about that, guys, the impact of
Speaker 2: climate change, body and the lack of snow. How are
Speaker 2: you incorporating that risk and reality into your business. I mean,
Speaker 2: we've finally seen some snow here in New York City,
Speaker 2: but it's barely a sprinkling here. But innovating with the
Speaker 2: idea that more and more skiers maybe skiing on man
Speaker 2: made snow, how does that come into it? And body,
Speaker 2: we've got about thirty forty seconds here.
Speaker 3: Yeah, it's you know, it's just the reality that we're facing.
Speaker 3: I think the ski industry is remarkably healthy. You know,
Speaker 3: I don't think it's an immediate thing for the ski industry.
Speaker 3: I think it's certainly important that we'd be dealing with
Speaker 3: it and addressing it, and in our company, recyclability of
Speaker 3: the skis is a huge part of the technology we're
Speaker 3: working with as well. So, you know, I think I
Speaker 3: don't see it being a massive problem. But you are
Speaker 3: going to have years like this year where it's been
Speaker 3: really tough at the beginning of the season's been tough
Speaker 3: for But do.
Speaker 2: You innovate differently? Body, do you make different types of
Speaker 2: skis because of maybe more man made snow just quickly, No.
Speaker 4: Not really.
Speaker 3: I mean you think a man made snow is on piece,
Speaker 3: you know, and then there's off these skis. And yes,
Speaker 3: the trend has been going much wider. So we certainly
Speaker 3: address that end of the market where it's on groomers
Speaker 3: on these skis. But the reality is there's a huge
Speaker 3: demand across the board.
Speaker 1: Right, Hey, Andy, we got about thirty seconds left. I
Speaker 1: want to give you the last word here and just
Speaker 1: ask you what's top of mind as we begin the
Speaker 1: year here and you guys are trying to build this company.
Speaker 5: I appreciate that, Tim, and it got to augment with
Speaker 5: point here is that the climate change matter is something
Speaker 5: that's an exigent threat for us overall. And what we
Speaker 5: do is number one, we reduce our footprint. Number Two,
Speaker 5: we're doing everything we can with this process to actually
Speaker 5: localize where skis are made. And so that's a pretty
Speaker 5: substantial contribution in favor of that. But relative to Peak
Speaker 5: and what we're doing, I emphasize the fact that we
Speaker 5: have Body and he's got this brilliant mental level, creative
Speaker 5: mind that is unique. It's almost like Chuck Yeger working
Speaker 5: it's Lucky Martin on the Mack capable airplane back in
Speaker 5: the forties. He's got this unique ability to be an
Speaker 5: engineer but at the same time put those skis on
Speaker 5: snow that enables us to take up this whole own.
Speaker 2: It's a nice compliment, very cool.
Speaker 1: Thank you guys for joining us. Andy Warz, CEO and
Speaker 1: President of Peak Ski Company and Vody Miller, Olympic and
Speaker 1: World Championship gold medalist and Chief Innovation Officer at Peak
Speaker 1: Ski