Peloton (PTON) reports Q4 2021 loss

Peloton Interactive Inc. stationary bicycles sit on display at the company’s showroom on Madison Avenue in New York, U.S., on Wednesday, Dec. 18, 2019.

Jeenah Moon | Bloomberg | Getty Images

Peloton said Thursday its fiscal fourth-quarter loss widened as the pace of revenue growth slowed dramatically and costs associated with a treadmill recall mounted.

Shares tumbled about 11% in extended trading on the news.

Peloton warned its earnings will be hurt in the near term because it’s slashing the price of its original bike by about 20%. It’s also beginning to shift its business mix back toward treadmill sales, which are less profitable than those of its cycles.

Additionally, the company faces heightened commodity costs and freight prices, while it plans to ramp up marketing spending in the months ahead.

Peloton offered up a disappointing first-quarter revenue outlook.

Here’s how Peloton did for the quarter ended June 30 compared with what Wall Street was expecting, using a survey of analysts by Refinitiv:

  • Loss per share: $1.05 vs. 45 cents expected
  • Revenue: $936.9 million vs. $927.2 million expected

Peloton posted a net loss of $313.2 million, or $1.05 per share, compared with net income of $89.1 million, or 27 cents a share, a year earlier. That came in larger than the 45-cent loss forecast by analysts polled by Refinitiv.

Total revenue grew 54% to $936.9 million from $607.1 million a year earlier, topping estimates for $927.2 million. But the pace of growth slowed from the third quarter, when sales more than doubled from year-ago levels and topped $1 billion.

Growth tapered off, in part, due to Peloton recalling both its Tread and Tread+ treadmill products in May, and temporarily halting sales of the machines. Its less expensive Tread is set to go on sale next week. The company has not yet said when it will resume sales of the Tread+.

But the cycle maker also faces stiffer competition from other at-home fitness businesses, such as Hydrow, Tonal and Lululemon-owned Mirror. And as pandemic restrictions are lifted, more consumers are opting to head back to the gym or take in-person group classes.

“The past year represented an inflection point for the connected fitness industry, with significant increases in awareness and demand following the onset of the Covid-19 pandemic,” Chief Executive John Foley wrote in a letter to shareholders.

Revenue from Peloton’s connected fitness segment, which includes contributions from the company’s acquisition of Precor, rose 35% year over year to $655.3 million, representing 70% of total revenue. Subscription revenue was up 132% to $281.6 million.

Churn rate ticks up

Peloton ended the quarter with 2.33 million connected fitness subscribers, a 114% increase from a year earlier. Connected fitness subscribers are people who own a Peloton product and also pay a monthly fee for access to the company’s digital workout content. 

Digital subscriptions — which don’t require equipment — were up 176% to more than 874,000, boosted by free trials, the company said.

Average net monthly connected fitness churn, which Peloton uses to measure retention of connected fitness subscribers, ticked up to 0.73% from 0.52% a year earlier. Peloton’s churn rate had hit a six-year low of 0.31% in the prior quarter. The lower the churn rate, the less turnover Peloton is seeing with its user base. 

Average monthly workouts per connected fitness subscriber, meantime, fell to 19.9 from 24.7 a year earlier. The company said the decrease was expected due to seasonal trends, such as more people vacationing during the summer months or spending more time outdoors.

Q1 outlook disappoints

For its fiscal first quarter, Pelotonsaid it is forecasting sales will reach $800 million, reflecting a reduction in the price of the Bike and a “modest” revenue contribution from the Tread.

The forecast is well below the $1.01 billion that analysts estimated. However, analysts were unaware that the company would cut the price of its Bike by about 20%.

The company anticipates having 2.47 million connected fitness subscriptions by the end of the quarter, with an average monthly churn rate of about 0.85%.

For the year, Peloton sees sales hitting $5.4 billion and connected fitness subscribers growing to 3.63 million. That’s ahead of consensus estimates for $5.27 billion.

Find the full earnings press release from Peloton here.

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