Peloton Sees Fiscal Q2 Revenue Fall Short of Guidance; Net Loss Wider than Expected

Peloton Interactive, Inc. (PTON) has reported that in its fiscal second-quarter, Total Revenue amounted to $657 million for the period ended December 31, a decrease of $17 million, or 3 percent year-over-year, primarily driven by lower-than-expected Connected Fitness Product sales to existing members. Revenue came in $8 million below the company’s previous guidance range.

Ending Paid Connected Fitness Subscriptions were 2.661 million in the quarter, a decrease of 214,000, or 7 percent year-over-year, and 6,000 above the midpoint of the guidance range. PTON saw better-than-expected Average Net Monthly Paid Connected Fitness Subscription Churn following membership price increases announced on October 1, which was partially offset by lower gross additions.

Total Gross Margin was 50.5 percent of revenue in Q2, an increase of 320 basis points year-over-year and 150 basis points above the guidance.

Company GAAP net loss was $39 million, or 9 cents per share, for the quarter. Analysts were expecting a loss of 7 cents per share for the quarter.

Adjusted EBITDA was $81 million, an increase of $23 million or 39 percent year-over-year and $6 million above the high end of the guidance range.

“Our second quarter represented the most substantial period of innovation at Peloton since our founding,” stated company CEO Peter Stern. “At the same time, our financial performance demonstrated our continued operational discipline, resulting in 39 percent year-over-year growth in Adjusted EBITDA and reducing Net Debt by 52 percent year-over-year, proving we can simultaneously innovate and increase our profitability.”

Stern continued, “We’re driving positive momentum across the business: the new Cross Training Series is resonating in the marketplace, our subscription base is highly committed, our integrated Commercial Business Unit is growing and well-positioned to continue doing so, and Member engagement with Peloton IQ is encouraging.”

Second Quarter Business Highlights

• Introduced the Peloton Cross Training Series, with across-the-board features and advanced computer vision capabilities on the Plus line.
• The integrated Commercial Business Unit introduced the Peloton Pro Series for fitness facilities and achieved double-digit year-over-year revenue growth.
• Released Peloton IQ to members, delivering AI-powered personalized guidance and insights to support fitness outcomes, and, at the end of the quarter, nearly half of active members had engaged with those insights and recommendations.
• Increased average workout time per connected fitness subscription by 7 percent year-over-year.

Outlook
“Looking ahead, our focus remains on executing our strategy to increase our share of the growing global wellness economy while continuing to enhance our magic formula of premium hardware, intuitive software, and unmatched human coaching,” Stern shared.

Third Quarter Outlook

• Ending paid connected fitness subscriptions is expected to be in the range of 2.650 million to 2.675 million, representing a decrease of 218,000, or 8 percent year-over-year, at the midpoint.
• Total Revenue is expected to be in the range of $605 million to $625 million, representing a decrease of $9 million, or 1 percent year-over-year, at the midpoint.
• Total Gross Margin is expected to be approximately 54.0 percent, reflecting an increase of 300 basis points year-over-year.
• Adjusted EBITDA is expected to be in the range of $120 million to $135 million, representing an increase of $38 million, or 43 percent year-over-year, at the midpoint.

Second Quarter Operating Metrics and Financial Summary

Image and tables courtesy Peloton Interactive, Inc.