Peloton slashed its outlook for the full year after reporting results for the first quarter ended September 30 came in below analyst expectations.
“We anticipated fiscal 2022 would be a very challenging year to forecast, given unusual year-ago comparisons, demand uncertainty amidst re-opening economies and widely-reported supply chain constraints and commodity cost pressures,” CEO John Foley said in a letter to shareholders. “Although we are pleased to have delivered first-quarter results that modestly exceeded our guidance, a softer than anticipated start to Q2 and challenged visibility into our near-term operating performance is leading us to recalibrate our fiscal year outlook.”
Peloton posted a net loss of $376 million, or $1.25 per share, compared with net income of $69.3 million, or 20 cents, a year earlier. Analysts had been looking for Peloton to post a loss of $1.07 per share.
Revenue grew 6 percent to $805.2 million from $757.9 million a year earlier, short of consensus estimates for $810.7 million.
Connected Fitness segment revenue, which includes the contribution from Precor, was $501.0 million, representing a 17 percent year-over-year decline. The decline primarily reflected fewer Bike portfolio deliveries compared to the year-ago period and the impact of the August 2021 price reduction on its original Bike.
Subscription revenue grew to $304.1 million, representing 94 percent year-over-year growth, driven by growth in Connected Fitness subscriptions from product sales as well as low average net monthly Connected Fitness churn of 0.82 percent, up from 0.73 percent in the prior quarter. Its Connected Fitness subscription base climbed to 2.49 million at the end of Q1, representing year-over-year growth of 87 percent.
Connected fitness subscribers completed 16.6 workouts per month, on average, a drop from 20.7 workouts a year earlier.
Sales and marketing expenses surged 148 percent to $284.3 million, representing roughly 35 percent of revenue. The year-over-year increase was primarily driven by advertising and marketing spending in support of the original Bike price reduction and the launch of the lower-priced Tread. The latter was just recently put back on sale in the U.S. following a widespread recall.
Due to the uncertain nature of the pandemic, Peloton said it is now presenting its outlook in ranges, rather than single estimates. It sees its connected fitness subscriber count growing to between 2.8 million and 2.85 million in the second quarter. Sales are forecast between $1.1 billion and $1.2 billion. Analysts were looking for $1.5 billion.
“The overall consumer environment has been very challenging to predict coming out of COVID, and we are reducing FY 2022 ending Connected Fitness Subscriptions by 6 percent at the midpoint. With the benefit of adequate inventories and order-to-delivery windows that are now back to pre-pandemic levels, we expect a healthy holiday selling season. Our forecast assumes unit sales modestly ahead of last year’s Q2 levels, driven by growing consumer interest in the Connected Fitness category and a resumption of our marketing and promotional activity.”
For the fiscal year, it sees revenue ranging between $4.4 billion to $4.8 billion, down from $5.4 billion. Analysts’ consensus was for $5.39 billion.
It now anticipates connected fitness subscribers to amount to between 3.35 million to 3.45 million, down from a prior outlook of 3.63 million.
“The primary drivers of our reduced forecast are a more pronounced tapering of demand related to the ongoing opening of the economy and a richer than anticipated mix of sales to our original Bike,” the company said.
Peloton added that, in conjunction with its revised forecast, it will be looking at its expense base and adjusting operating costs to better align investments with the new growth expectations.
Photo courtesy Peloton
