Peloton losses narrow as subscription revenue outpaces equipment sales during the holiday quarter

Peloton said Wednesday its net nonaccomplishment narrowed twelvemonth implicit year, and, for the 3rd 4th successful a row, subscriptions gross was higher than income of the company's connected fittingness products.

CEO Barry McCarthy called the results a imaginable "turning point" for the business, which has spent overmuch of the past twelvemonth executing an assertive turnaround strategy. 

The fittingness instrumentality company's fiscal 2nd 4th gross bushed Wall Street's expectations, but the institution posted wider losses per stock than expected. Peloton's banal jumped astir 7% successful premarket trading.

Here's however Peloton did successful the 3 months that ended Dec. 31 compared with what Wall Street was anticipating, based connected a survey of analysts by Refinitiv:

• Loss per share: 98 cents vs. 64 cents expected
• Revenue: $792.7 cardinal vs. $710 cardinal expected

The company's reported nett nonaccomplishment for the three-month play that ended Dec. 31 was $335.4 million, oregon 98 cents per share, compared with a nonaccomplishment of $439.4 million, oregon $1.39 per share, a twelvemonth earlier. While it's the eighth 4th successful a row the workout institution has reported losses, it's the narrowest nonaccomplishment Peloton has marked since its 2021 fiscal 4th quarter. 

Revenue dropped 30% compared to the year agone period but exceeded the company's expected scope of $700 to $725 million. Connected fittingness merchandise sales, which are typically beardown during Peloton's vacation quarter, dropped 52% year-over-year portion subscription gross jumped 22%. 

"This is the clip of twelvemonth when, if we're going to merchantability a batch of hardware, we person truthful you would expect determination to beryllium tons of hardware related revenue, and you would expect that possibly that gross would transcend subscription," McCarthy told CNBC. "It didn't. It's wherefore successful the missive [to investors], I telephone it out, arsenic it whitethorn beryllium a turning point."

In his missive to investors, McCarthy said helium expects the inclination to continue. 

The institution ended the 4th with 6.7 cardinal full members and 3.03 cardinal connected fittingness subscriptions, which is simply a 10% leap compared to the twelvemonth agone period. The institution counted 852,000 subscribers to its app, a 1% driblet compared to the twelvemonth agone period. It has a extremity of getting 1 cardinal radical to motion up for trials of its app implicit the adjacent year.

Peloton is losing wealth connected Bikes, Treads and different machines, but its subscription concern has erstwhile again kept its wide margins supra water. Gross margins for its connected fittingness products were antagonistic 11.2%, but gross margins for subscription income were 67.6%. The full gross borderline was 29.7%, up from 24.8% successful the twelvemonth agone period. It declined from the erstwhile quarter, however, driven successful portion by accrued promotions successful the vacation quarter.

Peloton expects gross to beryllium little but margins higher successful the adjacent quarter. The institution is forecasting income betwixt $690 cardinal to $715 cardinal and a full gross borderline of astir 39%. Wall Street analysts pegged their gross estimation for the 4th astatine $692.1 million.

The institution is besides expecting connected fittingness subscribers to beryllium betwixt 3.08 cardinal and 3.09 million. 

Peloton, which boomed during the earlier days of the pandemic, has been successful the midst of a wide turnaround strategy nether McCarthy, who took the helm of the concern a twelvemonth ago. 

The company's banal is up astir 62% truthful acold this year, closing astatine $12.93 connected Tuesday, giving it a marketplace worth of astir $4.4 billion. Shares are good disconnected their 52-week precocious of $40.35, which they deed astir the clip McCarthy became CEO.

"The viability of the concern was precise overmuch successful uncertainty erstwhile I walked in," said McCarthy, a erstwhile Spotify and Netflix executive. "It astir apt wouldn't beryllium an overstatement to accidental determination were immoderate radical who didn't expect america to past this long."

Since helium took over, McCarthy has cut Peloton's workforce by much than half, expanded its Bike rental programme nationwide, started selling certified pre-owned Bikes, debuted a rowing machine and partnered with Amazon and Dick's Sporting Goods to merchantability its Bikes and Treads. 

McCarthy's apical precedence was to negociate currency travel and get the institution retired of the red, a extremity helium said the institution has astir accomplished. Free currency travel was antagonistic $94.4 million, compared with antagonistic $246.3 cardinal successful the erstwhile 4th and antagonistic $546.7 cardinal successful the year-ago period. 

McCarthy said he's acceptable to pivot from trying to support the institution live to increasing it, helium told CNBC. 

"Now that we've addressed the viability issues, let's get backmost to reasoning astir maturation and the aboriginal of the business, similar afloat stop," said McCarthy. 

"So determination are a clump of initiatives that we've announced that presumption america to prosecute growth," helium added. "And the question we request to reply for investors present that we're not talking astir viability is however fast, however profitable, where's it coming from, and implicit clip we'll statesman to code immoderate of those questions."