Despite making some strides in Q2, Peloton Interactive did not live up to future sales expectations. The company is now forecasting a Q3 revenue range of $700 to $725 million, below average market guidance of $755.6 million and 3.2 to 6.5 percent below the year-ago quarter’s $749 million. That shortcoming helped send Peloton shares down more than 24 percent today to close at $4.21. Peloton expects to generate positive free cash flow in the final reporting period but fell short of achieving its objective for the FY.
The group, which is now forecasting a return to revenue growth in Q4, reported a 6 percent sales decline in Q2 to $743.6 million as the year-over-year gross margin fell by 30 basis points to 67.3 percent and the net loss shrunk by 42 percent to $194.9 million from $335.4 million. The adjusted Ebitda loss was $81.7 million versus a loss of $122.4 million in the year-ago period. While product revenues dipped by 16 percent to $319.1 million, the segment’s gross margin soared by lifting out of negative territory from the year-ago period. Subscription revenues were a mixed bag. Paid Connected Fitness subscriptions rose by 40,000 to 3 million, but the number of Peloton App subscribers fell by 44,000 to 718,000. Still, the company said the number of app subscribers exceeded expectations.
Peloton pointed out its wins and losses during Q2 in its regular quarterly letter to shareholders. On the plus side, growth in the bike rental program, increasing demand for the Tread+, 74 percent hardware sales growth in third-party retailers such as Dick’s Sporting Goods and Amazon, and a turnaround at Precor, where Q2 revenues hit $70 million amid a refocus on product development. It said that bike rentals, forecast to generate more than 100 percent year-over-year growth, are helping the company attract a more diverse, female and younger consumer than six months ago.
In Peloton’s loss column, there is a premium co-branded bike experiment with the University of Michigan that was to be expanded to other schools and a less-than-stellar member support (customer service) department during the holiday season. The school-bike program is being discontinued, and the member support department is undergoing an overhaul complete with new leadership and systems.
Elsewhere, Peloton has two new key senior executives: Nick Caldwell, who joined as Chief Product Officer in November, and Lauren Weinberg, who was named the brand’s new Chief Marketing Officer last month.
