Peloton Interactive significantly shrunk its loss in the third quarter ended March 31 as sales surged 141 percent.

Revenue
Peloton generated total revenue of $1,262.3 million, growing 141 percent year-over-year. Connected Fitness segment revenue was $1,022.9 million, representing 140 percent year-over-year growth and 81 percent of total revenue. Subscription revenue grew to $239.4 million, representing 144 percent year-over-year growth and 19 percent of total revenue, driven by strong Connected Fitness Product sales, an acceleration of expected deliveries and a low Average Net Monthly Connected Fitness Churn of 0.31 percent. Peloton’s Connected Fitness Subscription base climbed to 2.08 million at the end of Q3, representing year-over-year growth of 135 percent. As of March 31, 98 percent of its Connected Fitness Subscriptions were on month-to-month payment plans. In Q3, Average Monthly Workouts per Connected Fitness Subscription was 26.0, representing 47 percent year-on-year growth.

Users with Connected Fitness Subscriptions worked out with us 149.5 million times, up from 44.2 million workouts in the same
period last year, representing 239 percent year-over-year growth.

Gross Profit
Gross profit in Q3 was $444.9 million and 35.2 percent of revenue, representing 81 percent year-over-year growth. Connected Fitness segment gross profit was $290.4 million in Q3, representing 53.7 percent year-over-year growth. Peloton’s Connected Fitness segment gross margin was 28.4 percent, a 1,593 basis point decline versus last year. Compared to the year-ago period, Peloton’s Connected Fitness gross profit margin was primarily impacted by expedited shipping investments, the September 2020 Peloton Bike price reduction, and a modest mix shift of sales to its treadmill products. Subscription gross profit was $154.5 million in Q3, representing 172 percent year-over-year growth. Subscription gross margin was 64.6 percent, up from 57.8 percent in the year-ago period. Subscription Contribution was $163.7 million in Q3, representing 162 percent year-over-year growth.

Subscription Contribution Margin was 68.4 percent, versus the prior year at 63.6 percent. Peloton said it continues to experience leverage against its fixed costs associated with content production and relative current period decreases in certain travel and studio expenses due to COVID-19 restrictions. This quarter also benefited from approximately 200 basis points from adjustments associated with reserve accrual estimates for certain variable subscription expenses.

Operating Expenses
Total operating expense was $458.6 million, and grew 51 percent year-over-year, representing 36.3 percent of total revenue versus the prior-year period of 58.0 percent. Sales and marketing expense was $208.2 million, and grew 35 percent year-over-year, representing 16.5 percent of total revenue versus the prior-year period of 29.5 percent. Spending was lower than forecasted due to the shift of some media spend into Q4.

General and administrative expense was $180.6 million and grew 42 percent year-over-year, representing 14.3 percent of total revenue versus 24.2 percent in the year-ago period. Year-over-year growth was driven by continued investment in its teams and systems.

Research and development expense was $69.8 million and grew 210 percent year-over-year, representing 5.5 percent of total revenue, versus 4.3 percent in the year-ago period. Expense growth reflects increased investments behind new software features and hardware development pipeline, as well as accelerated spending associated with engineering recruitment and acquisition-related hiring.

Profitability 
Net loss for Q3 was $(8.6) million versus a net loss of $(55.6) million in the same period last year. Q3 Adjusted EBITDA was $63.2 million representing an Adjusted EBITDA Margin of 5.0 percent versus 4.5 percent in the same period last year. Basic and diluted loss per share was $(0.03).

Peloton said it would offer revised full-year guidance during prepared remarks on its earnings conference call.

Photo courtesy Peloton