Peloton’s 4th Quarter Earnings Call and shareholder letter, released this morning, gave us some insight into Peloton’s plans and a review of how the company is doing since the change in leadership that was announced last quarter.   The earnings call will be available on Peloton’s investor relations website for thirty days if you missed it – but we’ve got all the things you need to know right here!  

Overall Financial Health

Peloton experienced modest year to year revenue growth in this quarter for the first time since Quarter 2 in 2022.  The total revenue was $644 million, with subscriptions accounting for $431 of that amount. Debt was decreased by $200 million.  Leaders are focusing on improving profitability through software and hardware development and refining marketing strategies.    Sales and marketing expenses were reduced by $20 million this quarter – reducing the showroom footprint and a lower personnel headcount was part of the reason for this, along with a lower spend on marketing.  However, Quarter 4 profits were still below target range.  Peloton still sees a need to reduce costs to achieve better profit margins.  

Peloton experienced a net decrease of 59,000 app subscriptions  – some of this was attributed to the seat post recall, and some to a specific corporate wellness plan that did not renew its partnership with Peloton.  $10.7 million dollars of inventory was written off for excess and returned inventory (including people returning equipment in the 30 day return window following purchase).  

CEO Search

The CEO Search is underway and Peloton predicts that the new CEO will be on the next earnings call.  There has been a lot of interest in the position, and  while there is no exact start date for a new CEO, board members are currently focusing heavily on finding the new CEO, and some individuals have been identified as potential candidates.   The new CEO will be able to weigh in heavily as to the strategy of the company moving forward.  

Marketing

Marketing was mentioned numerous times during the call. The bottom line is that marketing spend has been pulled back until there is a clear idea of what the best marketing strategy is – Peloton is developing an “innovative roadmap” to determine how to invest marketing dollars.   Peloton intends to focus on improving the experience for members rather than spending money on marketing at this point.  When marketing does become a priority, Peloton hopes to market more to men and the Latino community.  

Marketing was previously focused on promotions.  Future marketing will move away from those messages and more towards promoting the  full value proposition of what members get for their Peloton subscription.  

Bike Rental Program

The Bike rental program was launched in the United Kingdom and early results outperformed Peloton’s expectations.  Rentals bring in new subscribers, and using refurbished inventory is key to the rental program.  However, refurbished inventory levels of the original Bike have decreased, so starting August 1,  the rental program will be only for the bike+.

Secondary Market

There are plenty of sales of Peloton equipment on the secondary market (Bikes owned by an individual and sold by an individual to someone else). Peloton realizes it needs to provide the same onboarding experience for members who purchase equipment on the secondary market.  These new members will be charged a $95 equipment activation fee, and Bike and Bike+ members will receive a virtual bike fitting.  Members will have access to a history summary on their equipment and Member discounts on accessories such as bike shoes, mats, and spare parts.  

Tread Growth

There is growth in this area, especially due to the re-release of the Tread+. Pace Targets and the Half Marathon Training Program have also improved the Tread experience.  A marketing campaign in July for the Tread resulted in positive traffic to pages that summarized offerings relating to the Tread.    

Partnerships

We’ve seen a lot of new partnerships recently, and Peloton will continue to explore partnerships in order to deliver profitable growth and expand reach.  Lululemon was mentioned as a partnership that delivers incremental subscription revenue with Peloton classes being offered on the Mirror.  Peloton also launched a pilot program with the YMCA of Metropolitan Chicago, and the Precor has also resulted in a growth in revenue.  

Connecting Members

Peloton is trying to connect members to each other to add community building potential.  They have launched members’ capability to find friends.  Other upcoming social features will be coming soon, including members’ ability to be a part of  private groups and challenges.  

Beta Testing

Innovative beta testing is taking place for personalized fitness plans, instructor led programs that can be taken in a gym setting, and more game inspired workouts, which include cycling experiences that involve social engagement in a virtual learning environment.  Watch your equipment as these roll out to be a part of these new ways to connect with other Peloton community members.  The “Just Guidance” feature allows members to follow workout plans created by instructors while enjoying their favorite content (AMC+, Direct TV, and Kindle have been recently introduced). 

New Instructors

The earnings call discussion hinted that new instructors may be added as well as guest instructors.  Christian Vande Velde and Irène Kaymer were mentioned as guest instructors that were well received by the Peloton community. 

No Planned Changes in Subscription Pricing

Peloton is looking at all pricing but has no plans now to increase subscription pricing.  

Movement Towards Strength

Peloton currently has sixteen modalities but not everyone knows about them all.  More people are moving towards strength workouts and strength is the second highest category used by members (with bike rides being the first).  Peloton wants to be known for strength and thus is working to plant the seed that Peloton is about more than just the bike, especially strength.  

A Thank You from the Board

The call ended with the current board and management thanking the amazing instructors and talented employees for all of their work. A nice way to end the call, as we know that the “behind the scenes” folks are the people who bring the Peloton content that we love so much to us every day.

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