Dive Brief:
- Peloton on Thursday reported third-quarter revenue fell 13% year over year to $624 million, which the company said was above the midpoint of its guidance range for the quarter. Connected fitness products revenue fell 27% year over year, while subscription revenue fell 4%.
- The company narrowed its losses during the period, reporting an operating loss of $32.4 million and a net loss of $47.7 million.
- Peloton’s ending paid connected fitness subscriptions fell 6% from the year-ago period to 2.88 million and ending paid app subscriptions fell 15% to around 570,000. Advertising and marketing spend also decreased during the period, down 46% year over year.
Dive Insight:
Although revenue continued to fall at the fitness company, CEO Peter Stern maintained that Peloton “performed at the high end of or above guidance on our key metrics.”
Stern highlighted Peloton’s focus areas ahead, which include improving equipment, software and instruction; expanding distribution of products; deepening connection with members; and enhancing its operations to be more competitive.
The company, which got its start as a stationary bike company, is looking to grow other areas of its cardio suite, including its treadmills. During the quarter, Peloton saw 5% year-over-year growth in running workouts and 11% growth in walking workouts. And while cardio will continue to be a focus area for the company, Peloton is looking to create a holistic experience for consumers, offering things like strength workouts and meditations.
Peloton is executing on its cost restructuring plan at a time of significant leadership changes at the company. Stern arrived at the company at the start of the year. The company’s chief marketer exited the company at the end of last month amid a restructuring, which includes splitting marketing responsibilities between two roles — a chief marketing officer and chief communications officer. Executives on Thursday said the company is actively searching for a CIO, chief marketing officer and chief communications officer.
Looking ahead, Peloton updated its full-year guidance, now expecting ending paid app subscriptions to be down 12% at the midpoint, compared to prior projections for down 7%. The company did raise its outlook for adjusted EBITDA, now projecting a range of $330 million to $350 million, up from previous estimates of $300 million to $350 million.
The company expects its full-year free cash flow to be around $250 million, which it says accounts for its expectation for a $5 million hit to the metric in the fourth quarter from the impact of tariffs. Both Peloton- and Precor-branded equipment are subject to a 25% tariff on their aluminum content, and Precor and apparel products sourced from China are subject to additional tariffs, the company said Thursday.
