Peloton sales growth booms amid new COVID case spike, lockdowns

Peloton's sales surged 232% year-over-year to $757.9 million, as the fitness company continues to see high global demand for its bikes and treadmills from consumers looking to stay in shape during the coronavirus pandemic.

“The recent spikes in Covid cases and newly imposed lockdowns in some of our markets have had a significant positive impact on sales,” Peloton CFO Jill Woodworth told analysts Thursday.

About 79% of the company's revenue, or $601.4 million, came from Peloton's connected fitness segment, while the other 21%, or $156.5 million, came from overall subscriptions.

The company reported net income of $69.3 million, or 20 cents per share, versus a net loss of $49.8 million, or $1.29 a share, a year ago, with gross profit of $328.7 million.

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Total connected fitness subscriptions climbed to over 1.33 million at the end of the quarter, or a year-over-year increase of 137 percent, and total digital subscriptions grew 382% to over 510,000.

"Our Members, both Connected Fitness and Digital, completed over 90 million workouts in the quarter across over 17,000 classes, up 332% year-over-year," Peloton CEO John Foley said. "We continue to ramp content production and produced over 2,400 new classes in the quarter."

Connected fitness subscribers averaged 20.7 monthly workouts, up from 11.7 a year ago. In addition, Peloton continues to hold onto the majority of its customers during the pandemic, with average net monthly connected fitness churn of 0.65% during the latest period, compared with 0.75% in the prior quarter.

While Peloton has made progress in narrowing its order-to-delivery window, customers continue to report delays in shipments and poor customer support. Foley said that Peloton's new Bike+ "drove call volumes and unacceptably long wait times" and that due to the ongoing impact of the pandemic, the company will be operating under supply constraints for the "foreseeable future."

"We will continue to work diligently to address delivery and support issues, as we have long prided ourselves on providing superior customer service," Foley added. "With an understanding of what is required to return to our normal standards, we continue to invest in technology, manufacturing capabilities, and people to help us scale and meet the needs of all our customers."

Foley hopes to meet normalized order-to-delivery windows for its bikes by the end of the calendar year, but expects wait times for its new Bike+ to remain elevated for the next couple of quarters. He told analysts on the company's earnings call that Peloton is adding manufacturing capacity, expediting deliveries and adding customer-support personnel in hopes of trimming delays.

“While these actions result in higher than typical logistics costs, we feel that incurring these incremental expenses in the short term is the right tradeoff to improve our member experience,” Foley said.

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Looking ahead, Peloton raised its revenue outlook for the 2021 fiscal year, expecting $3.9 billion in total revenue by the end of the fiscal year and 2.17 million total connected fitness subscibers. As for the second quater, the company expects $1 billion in total revenue and 1.63 million connected fitness subscriptions at the end of the period.

The company predicts its fiscal 2021 churn rate will remain under 0.9%, compared with a prior forecast of under 1%, while churn for the second quarter should stay below 0.85%. Meanwhile, its spending efforts to shorten delays is expected to lead to gross margins of approximately 39% for the second quarter and approximately 41% for the fiscal year.

Ticker	Security	Last	Change	Change %
PTON	PELOTON INTERACTIVE INC.	9.55	-0.79	-7.64%

Shares fell more than 6 percent in after-hours trading Thursday on Peloton's announcement.

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