Peloton raises its full-year profit guidance, but expects the holiday quarter to be softer than expected

Key Points

• Peloton's fiscal first-quarter results beat Wall Street's expectations.
• The connected fitness company raised its full-year adjusted EBITDA guidance but posted a weaker-than-expected holiday forecast.
• The Bike and Tread maker also announced a new CEO.

In this article

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Peloton is back to generating free cash flow and is edging within reach of profitability as the connected fitness company reins in costs and looks to improve the unit economics behind its hardware, it said Thursday.  

Despite the progress, Peloton is expecting to lose more members and sell fewer bikes and treadmills than Wall Street analysts had expected during its all-important holiday quarter. 

Still, the stock rose more than 25% in early trading Thursday after the quarterly update and the announcement of a new CEO.

Here's how Peloton did in its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Loss per share: zero cents vs. 16 cents expected
• Revenue: $586 million vs. $574.8 million expected

The company's reported net loss for the three-month period that ended Sept. 30 was $900,000, or effectively breakeven on a per-share basis, compared with a net loss of $159.3 million, or 44 cents per share, during the same period a year earlier. 

Sales dropped to $586 million, down about 1.6% from $596 million a year earlier. 

As Peloton prepares for its holiday quarter, which is typically its strongest for hardware sales, the company is expecting revenue to come in between $640 million and $660 million, below Wall Street expectations of $671.4 million, according to StreetAccount. 

It's also expecting to have fewer paid app subscribers than analysts had forecast, reflecting its decision to shift marketing dollars toward product development and away from its low-priced app — a key focus area of former CEO Barry McCarthy.

Peloton announced in May that McCarthy would be stepping down after roughly two years in the top job. On Thursday, the company said Ford executive Peter Stern would be taking over.

"He is the guy who is going to come in and set the strategy that is going to return us to growth," interim co-CEO Karen Boone said during Peloton's earnings call Thursday. "Under his leadership, our brand is well positioned to be a long term player and the absolute leader in this category."

The company is expecting to have between 560,000 and 580,000 paid app subscribers by the end of its current quarter, compared with expectations of 608,200, according to StreetAccount.

During Peloton's fiscal first quarter, it cut operating expenses by 30% compared with the previous year and posted nearly $116 million in adjusted EBITDA along with almost $11 million in free cash flow. 

It's expecting adjusted EBITDA of between $20 million and $30 million during its current quarter, compared with StreetAccount EBITDA estimates of $13.9 million. 

For fiscal 2025, Peloton raised its full-year EBITDA guidance – a key metric that investors are watching to gauge the company's future value. It said it's now expecting to generate between $240 million and $290 million in adjusted EBITDA, compared with a previous range of $200 million and $250 million. It's projecting revenue to be between $2.4 billion and $2.5 billion, on par with analyst expectations of $2.46 billion, according to LSEG. 

The gains are a result of a previously announced cost-cutting plan and the company's efforts to improve the unit economics of its hardware, which had long been a money-losing business for the company.

As part of the plan, Peloton lowered payroll and staff-based compensation, which the company estimates will amount to roughly $100 million in annual savings, according to Chief Financial Officer Liz Coddington. The company also reduced total sales and marketing expenses by $64 million, or 44% year over year, boosted by the lowest spent on media since fiscal 2020.

"As we look ahead to the holiday season, we are already ramping up media spend to support demand generation ahead of this important time for hardware sales and subscriber additions," interim co-CEO Chris Bruzzo said during Peloton's earnings call Thursday.

All together, Coddington said the company is on track to save around $200 million by the end of fiscal 2025.

During the fiscal first quarter, Peloton raised the recommended retail price for its Bike and Bike+ in its international markets and increased the price of its Row in North America, while also cutting down on discounts across its hardware portfolio. 

Those efforts, along with a better mix between its various revenue streams, boosted its connected fitness margin to 9.2% during the most recent quarter – an increase of 6 percentage points compared with the year-ago period.