Peloton Pedals Towards Profitability
The connected fitness giant, Peloton, has made significant strides towards achieving profitability, as it reins in costs and refines the unit economics behind its hardware. Despite this progress, the company expects to lose more members and sell fewer bikes and treadmills than anticipated during the crucial holiday quarter.
A Shift in Focus
Peloton’s quarterly update revealed a net loss of $900,000, a substantial improvement from the $159.3 million loss during the same period last year. Sales dropped to $586 million, a 1.6% decline from the previous year. As the company prepares for its busiest quarter, it expects revenue to fall between $640 million and $660 million, shy of Wall Street expectations.
New Leadership Takes the Reins
Peloton announced the appointment of Ford executive Peter Stern as its new CEO, replacing Barry McCarthy who stepped down in May. This change in leadership marks a significant shift in focus, as the company redirects marketing efforts towards product development and away from its low-priced app.
Cost-Cutting Measures Pay Off
During the fiscal first quarter, Peloton slashed operating expenses by 30%, resulting in nearly $116 million in adjusted EBITDA and almost $11 million in free cash flow. The company expects adjusted EBITDA of between $20 million and $30 million during its current quarter, exceeding StreetAccount estimates.
Raising the Bar
Peloton has raised its full-year EBITDA guidance, expecting to generate between $240 million and $290 million, up from its previous range of $200 million and $250 million. Revenue is expected to reach between $2.4 billion and $2.5 billion, in line with analyst expectations.
Hardware Revamp
The company’s efforts to improve the unit economics of its hardware have paid off, with a 6 percentage point increase in connected fitness margin to 9.2% during the most recent quarter. This was achieved through price hikes, reduced discounts, and a better mix of revenue streams.
As Peloton continues to pedal towards profitability, investors will be watching closely to see if the company can maintain its momentum and achieve its goals.
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