peloton The company posted a worse-than-expected holiday quarter on Thursday as shoppers didn’t spend money on the company’s new AI-driven product line and turned away from higher subscription prices.
The connected fitness company missed Wall Street expectations for revenue and bottom line profits in the three months ended Dec. 31, and also missed its own internal sales targets, which are usually the strongest for Peloton’s hardware revenue.
The company predicted that sales will continue to be sluggish this quarter. Peloton expects revenue to be between $605 million and $625 million, lower than the expected $638 million, according to LSEG.
Weak results and soft guidance are investors’ first clues that Peloton’s product overhaul may not be the sales driver the company had hoped for. Peloton’s stock price fell as much as 13% in pre-market trading following the results.
Featuring AI-powered tracking cameras, speakers, a 360-degree rotating screen, and hands-free controls, this improved assortment is designed to increase sales and attract new customers. But Peloton’s financial results show that demand is weak.
While Peloton’s sales numbers may be disappointing for investors, the company is still contributing to improved profitability. The company earned $81 million in adjusted earnings before interest, taxes, depreciation and amortization in the holiday quarter, according to Street accounts, beating analysts’ estimates of $73 million.
After announcing plans last week to lay off 11% of its workforce, the company now expects adjusted EBITDA to be between $120 million and $135 million for the quarter, beating analysts’ expectations of $119 million, according to Street accounts.
The company has raised its full-year adjusted EBITDA forecast from $425 million to $475 million to $450 million to $500 million.
This is welcome news for investors, as it shows Peloton has been able to innovate its product line without hurting profitability.
The company also announced Thursday that Chief Financial Officer Liz Coddington will be leaving Peloton to “pursue opportunities outside of the industry.” She will remain in her role until March as the company searches for its next finance chief.
Here’s how Peloton’s fiscal second quarter results compare to Wall Street expectations, based on a survey of analysts by LSEG.
Loss per share: 9 cents vs. 6 cents expected Earnings: $657 million vs. $674 million expected
The company’s net loss for the quarter was $38.8 million, or 9 cents per share, a significant improvement from its loss of $92 million, or 24 cents per share, in the year-ago period.
Sales were $656.5 million, down approximately 3% from $673.9 million in the same period last year.
Since Peter Stern became Peloton’s CEO, he has worked to create new revenue streams and further strengthen the company’s progress in improving profitability.
The product assortment refresh was one of his first major milestones as CEO, and included new prices for both subscriptions and hardware. Despite the price increase, hardware and subscription revenue were both lower than expected, indicating weak unit sales.
According to StreetAccount, hardware sales brought in $244 million in revenue during the quarter, and subscription sales brought in $413 million in revenue, both of which were below expectations of $253 million and $424 million, respectively.
Mr. Stern said in a statement that he is focused on improving the company’s profitability and sees “positive momentum” across the business.
“Our second quarter was the most substantial period of innovation since Peloton’s inception. At the same time, our financial performance demonstrated our continued operational discipline, resulting in a 39% year-over-year increase in adjusted EBITDA and a 52% year-over-year reduction in net debt, demonstrating our ability to simultaneously innovate and increase profitability,” Stern said. “Our subscription base is very committed and our combined commercial business unit is growing and well-positioned to continue doing so. We are encouraged by our member engagement with Peloton IQ.”
