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Peloton profit, forecast miss expectations by a mile as subscribers exercise less

Peloton was upbeat about the opportunity in corporate wellness, though the number of workouts per person trended down in the quarter. The company cut the price of its entry-level bike.
tiernan-ray
Written by Tiernan Ray on

Fitness equipment pioneer Peloton this afternoon reported fiscal Q4 revenue that narrowly topped expectations, but a net loss that was well below Wall Street consensus, and an outlook for revenue this quarter that was well below expectations. 

Workouts by the company's subscribers dropped by roughly 20%, year over year, during the quarter.

The report sent Peloton shares down by 5% in late trading. 

Peloton said in its shareholder letter that it was able to improve its logistics operations to return its time to ship devices to customers to "pre-pandemic levels" after substantial delays in the past year.

Reflecting on the corporate wellness program that the company introduced in late June, Peloton said that  the "initiative will provide employers, insurers, and other partners the ability to offer their employees and members

subsidized access to Peloton Digital subscriptions, All Access Memberships, and/or Connected Fitness Products."

The company added, 

The corporate wellness market is large and growing, and we are uniquely positioned to add value through our proven ability to drive high engagement and member satisfaction, while also offering back-end enterprise features that reduce administrative load, including tools to measure program impact via a secure, easy-to-use portal. Our initial launch partners include Wayfair, Samsung, SAP, Accenture Interactive, and Sky (in the U.K.) and on July 20th, we announced our first partnership with a health insurer, United Healthcare, the largest provider in the U.S. 

Peloton also said price remains a barrier to some consumers and so it lowered the price of its exercise bike, and offered long zero-percent financing terms:

Today, we announced our latest step in making Peloton more attainable by lowering the price of our original, award-winning Peloton Bike across all of our markets to $1,495 USD, or $39 per month with our 39-month financing plan. We know price remains a barrier and are pleased to offer our most popular product at an attractive everyday price point. We are also introducing a longer 43-month 0% financing term option for Bike+ and Tread across all regions, which equates to approximately $59 per month 

After a delay, Peloton said it was ready to start selling its exercise treadmill in the U.S.:

Having received approval of our repair remedy from the Consumer Product Safety Commission (CPSC), we're pleased to report that on August 30th we will officially launch sales of the Peloton Tread in the U.S. while resuming sales in the U.K. and Canada. We plan to offer Tread in Germany during Fall 2021 and Australia in the near future.  

Revenue in the three months ended in June rose 54.4%, year over year, to $937 million, yielding a net loss of $1.05 a share.

Analysts had been modeling $928.6 million and negative 73 cents per share.

Peloton's gross profit in the quarter, $254 million, declined by 12%, year over year, as the company's gross profit margin plummeted from 45.3% to 11.6%, it said. The sharp drop in margin was primarily the result of "recall-related costs, the impact of the September 2020 Peloton Bike price reduction, and increased supply chain and logistics expenses," the company said. 

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Peloton's "connected fitness subscriptions" more than doubled in the quarter to 2.33 million. The company's revenue from subscriptions, rose by 132%, year over year, to $281.6 million, equivalent to almost a third of total revenue, it said.

Even as subscribers joined up, people worked out less on average. Peloton said the total number of workouts done by Connected Fitness Subscriptions rose by 75%, year over year, to 134.3 million. That meant the average number of workouts per month per subscription dropped to 19.9 from 24.7 in the year-earlier period. 

Peloton said it had anticipated the decline in workouts, which it attributed to "typical seasonal trends associated with improving weather and consumer mobility" that it said "have re-emerged." The company added that the 19.9 figure "represented 66% growth from engagement levels during Q4 2019."

Peloton said its retention rate was 92% in the quarter.

For the current quarter, the company sees revenue of $800 million. That compares to consensus for $1.01 billion.

For the full fiscal year, the company sees revenue $5.4 billion, ahead of consensus of $5.33 billion.

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