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Tonal CEO on Lebron partnership: ‘It made perfect sense’

At-home fitness startup Tonal has partnered up with Lebron James. Tonal CEO Aly Orady joins Yahoo Finance’s Brian Sozzi and Julie Hyman to break down the details.

Video Transcript

BRIAN SOZZI: Breaking news that just crossed our desk. At-home fitness player Tonal announcing that NBA great LeBron James is now an investor and brand partner of the company. James will appear in Tonal's new advertising campaign as well. Joining us for a first on Yahoo Finance interview is Tonal's founder and CEO, Aly Orady. Aly, good to see you again here. Pretty big development for you on LeBron James. How did you score him? Because James is notoriously picky on who he invests with.

ALY ORADY: --excited about--

BRIAN SOZZI: Aly, I think you're on-- there you go. Sorry, I thought you were on mute. Go ahead.

ALY ORADY: Oh, no, thanks. It's something we're extremely excited about. The relationship with him started about 18 months ago when he first joined Tonal as an investor. And how it started isn't all too different from other athletes who invest. We have about 20 to 30 professional athletes who have invested in our business. And the story is always, they got a Tonal, they used it, they fell in love. And then they wanted to invest.

And over time, we've just built that relationship. And being someone who works with equipment, basically, his entire career has been around fitness his entire career. When he sees something like Tonal, adaptive digital way, it's something that's incredibly efficient, something that's incredibly data driven. He just-- he had to use it. And a partnership made perfect sense. He was excited about it. And we were able to make this happen.

BRIAN SOZZI: Aly, you see the list of athlete investors. You have Steph Curry, Drew Brees, Serena Williams. Is LeBron now the biggest athlete investor in your company?

ALY ORADY: LeBron is definitely one of-- he's, without a doubt, one of the greatest athletes of all time. We're really, really proud to have him involved in the business. We're excited. He's excited. And the most important thing that I can say about this is, he's been using Tonal to train. He actually believes in the product. It's something that he personally uses. He views strength as a foundation of greatness. And this is something that came up in a lot of our interactions with him. And being able to get stronger with the most advanced piece of equipment ever created is something that he's really, really aligned with.

This is something that, of course, we've seen with the likes of Serena Williams and Steph Curry and dozens of other athletes who use the product for that exact same reason. And he's just adding one of the greatest athletes of all time to our roster. And having him be involved with us in this capacity is just a huge, huge step for us.

JULIE HYMAN: Hey Aly, it's Julie. Obviously, when you get these folks sign on as investors, it-- you know, it's something that can potentially prompt more people to sign up and buy the product. How many people have bought the product? How many of these have you sold? And how has your sales growth been?

ALY ORADY: Well, we have not been talking explicitly about numbers in terms of dollars sales. But what I can tell you is we did last year announce that we grew 8x year over year, which is massive growth. In January of this year, we raised $250 million at a $1.6 billion valuation. And we've seen significant growth since then. And so, when you're looking at those valuation numbers and the multiples that you would assume are behind them, you can extrapolate the rate at which we're growing and how many Tonals we're selling. I'm just going to tell you, it's a lot. It's significant.

BRIAN SOZZI: Aly, do you expect some form of shakeout in this at-home fitness space? I see you guys-- very innovative product. Peloton-- very innovative product. I see something like a Mirror-- I would say not too innovative. And you see other competing type products out there. Ultimately, over time, is there just two major players in this space?

ALY ORADY: Well, we are the leaders in connected strength. We're also the leaders in intelligent fitness. One of the things that we did differently from everyone else in the sector is our aim to bring a personal trainer into the home, rather than just a group fitness experience. We did that by bringing a lot of data to bear by building AI and personalization. And we really view that as intelligent fitness, not just connected fitness.

So we're forging ahead and we're leaders in multiple dimensions. We've built all sorts of moats around our business. We filed over 45 pounds today. Of course, there is one business that you mentioned, Peloton, which is significantly larger at this point. But we're growing faster than they historically grew.

And then, you're right. After that, there's a lot of smaller businesses who are building more point or niche solutions. And I do expect that that's going to shake out over time. I don't believe this is a winner take all market, but I also don't believe it's a market where we're going to have room for a dozen different players.

BRIAN SOZZI: And Aly, news out today that Apple is having trouble just getting components for its iPhones. I mean, how does your supply chain look in this environment?

ALY ORADY: I'll just tell you, it's a lot of work to secure supply. We've tripled the size of our manufacturing team just in the past 12 months. And the 12 months prior to that, we 10x'ed our manufacturing capacity. We brought a second factory online last year, bringing another factory, a third factory, online in the next few months. And a lot of this is just about securing materials, securing capacity, keeping supply chains moving, and logistics, just moving product around the world and across the country. It's hard work, and it's where we're making a lot of investments.

The vast majority of our investments are either going to marketing brand operations or content, where you might have heard, but we recently announced live content on our platform as an addition to the many forms of content that are available to our members.

JULIE HYMAN: And Aly, I know you've been asked this before, and I'm going to ask it again, on what the IPO plans are. And if you're not ready to IPO now, sort of, what you're looking for. What would be the trigger? What would be the thing that would mean that you're ready to go there?

ALY ORADY: Well, we've been building towards it in the last six months alone. We brought in a number of new executives into the C-suite, and operations, product experience, technology. And a lot of that is about getting-- readying the company for an IPO. We still have a lot more building to do in terms of operations, finance infrastructure, and a lot of the compliance things that you need to be public. But it's something we're working towards every single day.

We're going to look for that moment in time where being a public company is beneficial to us and is not a distraction. Being public can often take a lot of management energy. And right now, we're growing so fast that we just want to focus on supporting that growth rate and really supporting our member base, which is incredibly passionate about our product.

We have a net promoter score that is pretty stable at 85. We have the highest engagement in the sector. And those are metrics we certainly don't want to lose track of, just to become public. We'll become public when we can pull off being public, tap those kind of public capital markets, and make sure that our business is solid throughout the entire process.

BRIAN SOZZI: Well, we'll see you back on Yahoo Finance when that big day happens. Tonal founder and CEO, Aly Orady, good to see you.