Earnings

Peloton Passes 1 Million Connected Customer Mark

The digital beat goes on for Peloton as the connected fitness company sprinted past expectations for its Q4 as well as aggregated metrics for its full fiscal year 2020. Almost all of Peloton’s KPIs came in at triple-digit increases as its connected fitness subscription base topped one million with a churn rate of below 1 percent.

Total revenue was $607.1 million in the company’s Q4, a 172 percent year-over-year growth rate as the continuing presence of the pandemic kept consumers working out at home. The connected fitness segment revenue was $485.9 million in Q4, representing 199 percent quarterly growth and 80 percent of total revenue. The connected fitness segment reflects both a carryover of undelivered bikes from Q3 as well as continued strong demand due to the ongoing COVID-19 pandemic.

Subscription revenue to the company’s app and at-home workout programs grew to $121.2 million in Q4, which represented 99 percent growth over 2019 and 20 percent of total revenue. The subscription base topped 1.09 million at the end of Q4. One of the more impressive stats of the quarterly metrics was engagement. The average Peloton owner logged 24.7 monthly workouts vs. 12 in the same period last year. Subscription-based members worked out 76.8 million times in Q4, up from 17.8 million in 2019.

“Digital fitness is a highly competitive category, with higher churn and lower barriers to entry than our connected fitness subscription and model,” said CEO John Foley on the company’s earnings call. “While we believe we have the best digital fitness experience with the broadest and deepest assortment of high-quality programming. We continue to focus on digital as an acquisition channel, and added value for our connected fitness subscriptions, and we’re excited to say that digital is emerging as our fastest growing lead generation channel.”

Most of the conversation on the earnings call concerned the company’s two new product extensions and supply chain issues. Earlier this week, the company announced a new bike model called Bike+ at a $2,495 price point. The new bike includes a 24-inch touchscreen and a sound system, which allows customers to rotate the display to perform different types of workouts with instructors. The new bike is a precursor to a strength-oriented fitness program, which is rumored to be the company’s next equipment category. Foley alluded to that development on the call, but did not hint at a potential introduction date for it. The new bike is currently available in the U.S., Canada, U.K. and Germany.

The existing model bike has been discounted to $1,895. Executives on the call discussed a trade-in plan in which current owners can upgrade to the new bike and receive a $700 discount. There will, at some point, be a refurbished bike sales program, but again Foley did not put a date on it.

The second product line extension is a smaller-footprint treadmill, called Peloton Tread. It will be available in the U.S. the day after Christmas, leading several analysts to question whether Peloton can deliver the goods on time. A new manufacturing facility for the company comes online in December.

“We feel comfortable that we’re in a position to meet the holiday demand on bike and tread that’s within a forecast of course,” said Foley. “As we’ve seen with COVID, we’ve seen a surge in demand and so we’ve been busy expanding capacities. I feel like we have a great team making investments to aggressively to expand the supply chain and so at this point, we feel like we’ve got a great plan in place. We expect to fulfill that demand, albeit with the longer order-to-delivery timeline than we’d like, but we think that situation will start to abate based on our projections as we get into Q3 (2021) and Q4.”

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