Peloton (PTON) Q3 2021 consequence
A monitor displays the signage of Peloton Interactive Inc. during the company’s IPO across the Nasdaq MarketSite in New York, United States on Thursday, September 26, 2019.
Michael Nagle | Bloomberg | Getty Images
Peloton announced Thursday that its fiscal third quarter revenue increased 141% as recent investments in its supply chain allowed it to improve the pace of delivery.
Yet even as the company made progress in addressing supply bottlenecks created by its popularity as a home exercise method during the pandemic, it faced another challenge: the need to recall its treadmills in the US after a child died and Dozens were injured in accidents with the Tread + machine.
Peloton stock fell Thursday as the financial results were released. The report did not provide details of the financial impact of the recall or its prospects. However, the stock recovered losses after the company detailed its profit call.
Peloton stock recently gained more than 4% in extended trading.
The company believes the treadmill recall, which halted sales of both treadmills and delayed the planned rollout of a lower-cost version, will lower sales by $ 165 million in the fourth quarter.
Refinitiv estimates fourth-quarter sales of $ 915 million, down from analysts’ $ 1.12 billion.
Peloton too Expect a cost as customers receive full refunds and for three months these customers’ membership fees are waived. The company expects the cost to lower adjusted EBITDA for the fourth quarter by approximately $ 16 million.
“Our goal is to have the best treadmill product safety features on the market,” said Chief Executive John Foley during the call. “There will be short-term financial implications because of the steps we are taking.”
A day earlier, Peloton issued a voluntary recall of all treadmills, affecting around 125,000 Tread + machines and around 1,050 Tread products in the United States
Still, the demand for its cycles, which make up most of its business, remains strong.
The company reported for the quarter ended March 31st, versus Wall Street’s expectations, based on an analyst survey conducted by Refinitiv:
- Loss per share: 3 cents compared to 12 cents expected
- Revenue: $ 1.26 billion versus $ 1.1 billion expected
Peloton’s net loss declined from a loss of $ 55.6 million, or 20 cents per share, last year to $ 8.6 million, or 3 cents per share. That was better than the analysts expected loss of 12 percent per share.
Total revenue rose 141% from $ 524.6 million a year ago to $ 1.26 billion, beating a Wall Street forecast of $ 1.1 billion.
Connected Fitness revenue increased 140% to $ 1.02 billion, representing 81% of total revenue. Subscription revenue increased 144% to $ 239.4 million from 2020, accounting for 19% of total revenue.
The sales are partly due to an acceleration of the expected deliveries, said Peloton. Last quarter announced plans to invest $ 100 million in air freight and expedited ocean freight over a six-month period to expedite shipping. The company recently completed the $ 420 million acquisition of Precor to improve its manufacturing capabilities in the United States.
The company said the average waiting time for its bike is now back to pre-pandemic levels.
“Although progress has been made, further efforts still need to be made to shorten delivery times for the rest of our product portfolio and our regions,” said CEO John Foley in a letter to shareholders on Thursday.
Churn hits record low
Peloton ended the quarter with 2.08 million connected fitness subscriptions, up 135% year over year. Connected Fitness Subscribers are individuals who own a Peloton product and also pay a monthly fee to access the company’s digital training content.
The average monthly connected fitness churn, which Peloton uses to measure retention of connected fitness subscribers, hit a six-year low of 0.31%. The lower the churn rate, the less revenue Peloton has from its user base.
The total number of workouts, which include connected fitness users and digital-only customers, increased from 48 million last year to over 171 million.
The company has added new content such as barre and Pilates classes to keep its customers engaged. It is also preparing to launch in Australia later this year as it continues to enter new markets.
Working to Approve New Design
On Wednesday, Foley apologized for initially rejecting the US Consumer Product Safety Commission’s recommendation to recall the treadmills. In a statement, he said he should have acted faster to resolve the issue than the security concerns were raised.
Peloton originally declined to be recalled, saying customers should use their machines when children and pets are not around and lock the machines when they are not in use.
The CPSC must approve new improvements to their treadmills that will make the equipment safer before it can be sold again, Foley said. He added that he believes the Tread will be back on the market “much sooner” than the Tread +.
“This process typically takes six to eight weeks. It can take longer, so we are currently unable to offer a sales date or revised start date,” said Foley.
Peloton’s Tread + machine has an unusual belt design that uses individual rigid rubberized slats or treads that are connected to each other and travel on a rail. Many other treadmills on the market have a thinner, continuous belt. There is also a large gap between the bottom and the belt of the Tread +, which leaves a space underneath that can pose a risk.
In April, the CPSC released a graphics video showing a boy being pulled under one of the Tread + machines and struggling to break free. It was recorded on a surveillance camera.
With the Tread, some users have reported their screens unscrewed and falling off.
Peloton stock has fallen more than 45% since the market closed on Thursday. It has a market capitalization of $ 24 billion.
Here you can find the results of Peloton.