Peloton produces profit for the first time amid pandemic-demand spike, stock pushes toward new record


Peloton Interactive Inc. reported fiscal fourth-quarter earnings Thursday afternoon.


MarketWatch photo illustration/iStockphoto

A year after its initial public offering, Peloton Interactive Inc. is pedaling toward new highs amid a pandemic that is forcing people into their homes and away from gyms, creating demand for at-home fitness equipment.

Peloton
PTON,
-3.75%

on Thursday wrapped up its fiscal year by reporting that sales and subscribers roughly doubled in the 12-month period, and revealed its first profitable quarter as a public company and record quarterly revenue a little less than a year after its September 2019 IPO. Shares fell 3.8% Thursday from Wednesday’s record closing price of $91.17 — more than three times the IPO price of $29 a share — but pushed back toward record highs in after-hours trading following the release of the report, with gains of more than 7%.

Peloton reported fiscal fourth-quarter profit of $89.1 million, or 27 cents a share, on sales of $607.1 million, up from $223 million a year ago. Peloton reported a net loss of $47 million in the fiscal fourth quarter a year ago, just ahead of its IPO. Analysts on average expected earnings of 10 cents a share on sales of $586 million, according to FactSet.

“It has been another staggering year of growth, and I know all parts of the organization have had to work together to do everything possible to meet the incredible demand for our products and services,” Chief Executive James Foley said in a conference call Thursday. “The strong tailwind we experienced in March as the COVID-19 pandemic took hold has continued to propel demand for our products into the fourth quarter and first couple of months of Q1 fiscal year 2021.”

While still attempting to catch up to a flood of orders amid the COVID-19 pandemic — Peloton said Thursday it does not expect order-to-delivery times to normalize until around the end of the calendar year — the company is also looking to expand its customer base. On Monday, Peloton announced that it will reduce the price of its standard exercise bike and introduce a lower-priced treadmill, which could clear a path for potential buyers who were not willing to pay the large upfront costs for its products. It will also introduce a premium bike for fans who want top-of-the-line equipment.

Wedbush analysts noted that in a previous survey of 1,200 people, they found that Peloton could “dramatically improve” sales at a lower price point, especially in treadmills.

“42% of non-Peloton owners that were interested in fitness and familiar with the brand showed some level of interest in a $2,500 Tread, compared to just 30% showing interest in the current Tread,” the analysts wrote in a Sept. 9 note, after Peloton announced its new lineup. “Among existing Peloton bike owners, the number of respondents saying they would be ‘very interested’ in owning a treadmill from Peloton doubles based on the lower price, from 14% based on the $4,295 price point to 28% assuming a theoretical (at the time) $2,500 price point.”

While lower sales prices could hurt hardware margins and average selling prices, much of Peloton’s long-term prognosis focuses on the subscriptions for interactive workout media that owners continue to pay after they have received the equipment. Peloton announced Thursday that it now has 1.09 million subscribers, nearly doubling the 511 million that it reported at the end of its last fiscal year, topping its forecast of 1.04 million to 1.05 million.

In total for the fiscal year, Peloton collected revenue of $1.46 billion from the sale of equipment and $363.7 million from subscription services, up from $719 million and $181 million, respectively, in the previous fiscal year. Combined with other revenue from merchandise and other offerings, Peloton ended the year with $1.83 billion in sales, up from $915 million.

“By the end of FY 2020 our Peloton membership base grew to approximately 3.1 million, compared to 1.4 million members in the prior year,” Peloton detailed in a letter to shareholders Thursday. “Fueled in part by the challenges associated with COVID-19, member engagement reached new highs with 164 million Connected Fitness Subscription workouts completed in FY 2020.”

For the current fiscal year, which began in August, Peloton predicted htat subscribers and revenue would roughly double yet again. The company guided for revenue of $3.5 billion to $3.65 billion, with connected subscribers swelling to 2.05 million to 2.1 million. Analysts on average were predicting revenue of $2.74 billion and subscribers of 1.78 million ahead of the report, according to FactSet.

Peloton stock has gained more than 260% since its IPO; the S&P 500 index
SPX,
-1.75%

has returned 17.7% in that time. In after-hours trading Thursday, shares topped $94 following the release of the report.



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Peloton stock heads for record high after reporting surge in pandemic purchases


Peloton Interactive Inc. sales topped $500 million in its most recent quarter, a new milestone that pushed the connected exercise-equipment company’s young shares toward record highs in after-hours trading.

Peloton
PTON,
+4.99%

reported that quarterly sales hit $524.6 million, up 66% from the year before, thanks to a surge in sales for its exercise bikes in the last few weeks of the company’s fiscal third quarter, as COVID-19 began to spread in the U.S. and force shelter-in-place orders that kept people indoors. Sales of its equipment grew 61% to $420.2 million, even though the company stopped selling its treadmill on March 19.

“During the last few weeks of Q3, we saw a significant increase in demand for our bike, which has continued into Q4 so far,” the company disclosed in a letter to shareholders.

The company backed up its prediction of continuing hot sales by raising its guidance for the full year by nearly $200 million, less than two months before the fiscal year comes to a close. Peloton now expects annual sales of $1.72 billion to $1.74 billion, after previously guiding for $1.53 billion to $1.55 billion.

Peloton shares jumped nearly 11% in after-hours trading Wednesday after closing with a 5% gain at $38.03. Shares were headed for record highs, trading above the company’s intraday high of $39.25. Peloton went public in September at $29 a share. The stock was up about 16% premarket Thursday.

While Peloton sales jumped, losses still grew as the company faced unexpected costs, including for shipping its bikes amid an increase in overall shipping. Peloton lost $55.6 million, or 20 cents a share, up from $38.6 million a year ago. Analysts on average were expecting a loss of 18 cents a share, according to FactSet.

Higher expenses aren’t Peloton’s only issue with shipping. The company said that it is struggling to get orders to customers, and also expects that to continue, along with the temporary pause in sales of its treadmills.

“We entered Q4 with a backlog of bike deliveries in all geographies and sales continue to surpass expectations in the first several weeks of Q4 due to COVID-19,” the letter to shareholders reads. “Unfortunately, the unexpected sharp increase in sales has created an imbalance of supply and demand in many geographies, causing elongated order-to-delivery windows for our customers. … We do not expect to materially improve order-to-delivery windows before the end of Q4.”



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Peloton gets lockdown boost as home workouts drive exercise bike sales By Reuters


© Reuters. A Peloton logo is seen after the ringing of the opening bell for the company’s IPO at the Nasdaq Market site in New York City

(Reuters) – Peloton Interactive Inc (O:) raised its forecast for full-year revenue on Wednesday as “stay at home” orders led to a surge in sales of the company’s exercise bikes and fitness subscriptions, sending its shares up 5%.

The strong results validated heightened expectations after analysts hailed Peloton, known for its $2,200 exercise bikes, as one of the few companies to benefit from prolonged lockdowns and a shift in consumer behavior due to the COVID-19 pandemic.

With gyms and fitness clubs closed, Peloton has also become a hot topic across the internet. Online searches for “Peloton” nearly tripled since the end of February, according to Google (NASDAQ:) Trends, while its stock price gained 36% in the same period.

Sales of Peloton’s electric bikes and other fitness equipment jumped nearly 61% to $420.2 million in its fiscal third quarter ended March 31. Its subscribers, who shell out $12.99 per month for live online exercise sessions, almost doubled to over 886,100.

“The extraordinary events taking place over the past two months have measurably expanded our market opportunity and accelerated the ongoing shift to connected fitness,” Chief Financial Officer Jill Woodworth said on a post earnings call.

Executives also added that the current norm of social distancing and working from home was permanently influencing consumer behavior.

The loss-making company said it entered the fourth quarter with a backlog of bike deliveries in all geographies, and that its sales continue to surpass expectations.

Peloton forecast fourth-quarter revenue of $500 million to $520 million, well above the average analyst estimate of $383.26 million, but said it would incur higher costs to expedite shipments of equipment that was delayed due to the unexpected sharp increase in demand.

For the full year, it forecast revenue to be in the range of $1.72 billion to $1.74 billion, compared with an earlier forecast of $1.53 billion to $1.55 billion.

The company also raised its outlook for Connected Fitness subscribers, or paid subscribers, for the year to 1.04 million to 1.05 million, from its previous estimate of 920,000 to 930,000.

In the reported third quarter, Peloton’s total revenue surged 65.6% to $524.6 million, handily beating analysts’ estimates of $487.7 million.

However, net loss attributable to Class A and Class B shareholders increased to $55.6 million, or 20 cents per share, in the quarter ended March 31, from $38.6 million, or $1.76 per share, a year earlier. Analysts were expecting the company to post a loss of 17 cents.

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