Peloton Sales Jump 66% on Covid-19 Boost for Home Workouts

(Bloomberg) -- Peloton Interactive Inc. said quarterly revenue soared 66% and paid digital subscribers jumped 64% after the Covid-19 pandemic spurred thousands of people to work out at home. The company also raised forecasts, sending the shares up more than 9% in extended trading.

The New York-based maker of fitness equipment and online exercise services said it generated $524.6 million in sales and grew to over 886,000 connected fitness subscribers, easily beating analysts’ estimates.

“Connected Fitness Product revenue exceeded our expectations across all geographies driven by strong demand for our Bike,” Peloton said Wednesday in a letter to shareholders. “During the last few weeks of Q3, we saw a significant increase in demand for our bike which has continued into Q4 so far.”

The company also raised its fiscal 2020 revenue guidance to a range of $1.72 billion to $1.74 billion and sees 1.04 million to 1.05 million connected fitness subscribers. For the current quarter, the company expects revenue of $500 million to $520 million, exceeding analysts’ estimates, according to data compiled by Bloomberg.

Peloton went public last year in the midst of a debate about whether the company could build a sustainable business selling expensive stationary exercise bikes and pricey subscriptions to digital workout classes. The pandemic lockdown of millions of people has quelled dissenters for now and sparked a furious rally in the stock. Before Wednesday’s results, the shares closed at a record $38.03 and have gained about 34% so far this year.

The company is now projecting 2020 fiscal-year earnings will be $30 million to $40 million, excluding interest, tax, depreciation, amortization and other items.

Chief Executive Officer John Foley said on a conference call that Peloton is working on multiple new products, including a cheaper treadmill. The company is also planning a rowing machine, Bloomberg News has reported. While sales are strong despite retail stores being closed, Foley said the company is re-thinking the time line for rolling out its new products due to the pandemic.

Still, expectations are now high, and when coronavirus lockdowns end, some users may cancel their Peloton memberships and choose to return to the gym. The company noted that 95% of its connected fitness subscribers were on month-to-month payment plans at the end of March. It’s also still losing money, based on more standard measures of profitability: For the fiscal third quarter, Peloton reported a net loss of $55.6 million, compared with a loss of $38.6 million in the same period a year earlier.

Peloton generated $98.2 million in the fiscal third quarter from subscriptions, up 92% year over year, and $420.2 million from product sales, up 61%.

The company also said there was strong demand for its Tread workout machine before Peloton paused sales and deliveries on March 19. Sales of the treadmill won’t resume during this fiscal year, which ends June 30. The company said it is still facing a backlog of bike deliveries. Customers ordering bikes are facing delays, and the company said it doesn’t expect to “materially” improve delivery times by the end of the current quarter.

Peloton also said it averaged 17.7 monthly workouts per subscriber, up from 13.9 in the year-ago quarter and that its subscriber churn was the lowest in four years. It said it is “pleased” with its liquidity and has $1.4 billion in cash and cash equivalents.

©2020 Bloomberg L.P.