Peloton Interactive reported* that total revenue was down 6 percent to $743.6 million for the fiscal second quarter ended December 31, 2023, compared to the company’s guidance range of $715 million to $750 million.

  • Connected Fitness segment revenue was $319.1 million in the quarter, down 16 percent from $381.4 million in the prior-year period.
  • Subscription revenue was up 3 percent to $424.5 million for the period.

Total gross profit was $299.4 million for the fiscal second quarter, yielding a gross margin of 40.3 percent of sales, versus 40 percent guidance.

  • Connected Fitness segment gross margin was 4.3 percent of sales, in line with internal expectations.
  • Subscription segment gross margin was 67.3 percent of sales for the period, which was in line with company expectations.

Total operating expenses, including restructuring and impairment expenses, were $486.5 million for the three months ended December 31, 2023, compared to $566.4 million for the three months ended December 31, 2022.

General and administrative expenses decreased by $31.9 million versus the year-ago period, primarily driven by decreases in legal and other professional fees of $25.0 million and a reduction in stock-based compensation expenses.

Sales and marketing expenses increased $13.2 million versus the year-ago period, reflecting higher acquisition media spending, offset by lower personnel-related, retail showroom, and stock-based compensation expenses. Research and development expenses were flat versus the year-ago period.

Peloton recognized $17.0 million of impairment and restructuring expenses in the quarter, of which $7.4 million was non-cash. The non-cash charges were primarily related to the loss on the sale of a manufacturing subsidiary and asset write-downs regarding Peloton Output Park. The cash charges were comprised of $9.3 million in exit and disposal costs and professional fees and $0.3 million in severance and other personnel costs.

Net cash used in operating activities was $(31.2) million and free cash flow was $(37.2) million. We ended the quarter with $737.7 million in unrestricted cash and cash equivalents. We also have access to a $400.0 million revolving credit facility, which remains undrawn.

Q3 Outlook
Looking ahead, PTON said its Q3 Paid Connected Fitness Subscription guidance reflected an updated outlook for hardware sales based on current trends and the seasonality the company typically observes in its business. The company expects a similar Paid Connected Fitness Churn rate similar to Q2.

PTON shares we down nearly 10 percent at the opening of the markets on Thursday, February 1.

Image courtesy Peloton

*Look for more news from Peloton’s latest report and conference call with key executives in SGB Executive.