Peloton Interactive, still pursuing its next permanent CEO, is vowing to focus on sustainable, profitable growth in FY25 and avoid spending inefficiently to acquire unprofitable subscribers. To that end, the connected fitness company will spend less on marketing to pursue these customers, but it currently has no plans to raise its subscription prices.
In Q4 ended June 30, the group reported flat year-over-year revenues at $643.6 million versus $642.1 million but an 87 percent improvement in the quarterly net loss to $30.5 million against a loss of $241.8 million. Connected Fitness revenues from the brand’s treadmill portfolio increased by 42 percent due to re-introducing the higher-priced Tread Plus treadmill.
Adjusted Ebitda was $70 million. Gross margin improved to 48.5 percent from 31.3 percent as subscription gross margin gained 30 basis points year-over-year to 72.4 percent. Cash generated by operations was $33 million, up from $21 million in Q3. Sales and marketing costs, which fell by 19 percent or $26 million in Q4 due to lower spending on media, retail showrooms and brand/creative, will be reduced further in FY25, the company said.
Peloton introduced its Bike+ rental program in the U.K. in Q4 and said the early results have exceeded its expectations. Additionally, the group, intent on growing its Tread business, debuted Pace Targets, a program that enables instruction for personalized intensity levels rather than treadmill speed. The group is also continuing to invest in new content and features for its app that focus on enhancing the brand’s content offerings, personalization, and social features.
Precor, the company’s commercial fitness business, continued its turnaround path in Q4 as its year-over-year revenues grew by 20 percent that were helped by key new product launches. The unit’s gross margin improved by more than 22 percentage points as it exited manufacturing operations in North Carolina and reduced operating costs by more than 40 percent during a recent restructuring.
For FY24, Peloton’s annual loss from operations was $529 million, a year-over-year improvement of 56 percent from FY23’s loss of $1,197.1 million. The annual net loss of $551.9 million was also 56 percent better than the $1,261.7 million loss reported in the prior FY. Total revenues fell by 3.6 percent to $2,700.5 million, slightly ahead of May guidance of $2.69 billion. Connected Fitness products sales tumbled by 12.3 percent to $991.7 million. Subscription revenues, meanwhile, grew by 2.3 percent for the FY to nearly $1.71 billion. Annual gross margin soared to 44.7 percent from 33.0 percent in FY23.
With the group focused on improving both profitability and free cash flow in FY25, Peloton has disclosed its initial FY25 guidance for the 12 months that began July 1. The outlook calls for adjusted Ebitda of $200 to $250 million, a gross margin of 49.0 percent, and a 9 percent decline in total revenues from $2.4 to $2.5 billion. The company disclosed that it does not include a benefit to connected fitness hardware sales from growth initiatives. The annual free cash flow estimate is $75 million, although Q1 free cash flow is forecast to be negative due to the timing of inventory payments ahead of the holiday season.
