Peloton’s bike wait time back to pre-COVID-19 levels

Peloton's delivery wait times for its Bike product have returned to pre-COVID-19 levels of one to three weeks after the fitness company made significant investments in the third quarter to expand its supply chain capabilities. Bike+ wait times are also coming down and are expected to return to pre-COVID-19 levels by the end of the fourth quarter.

Chief financial officer Jill Woodworth told analysts on the company's earnings call Thursday that Bike and Bike+ unit sales remain "significantly higher" than pre-COVID levels.  

"We expect the global Bike and Bike+ unit sales in [the fourth quarter of 2021] to be over three times higher than they were in [the fourth quarter of 2019]," she said. 

HOW PELOTON'S TREADMILL RECALL MAY IMPACT FUTURE DEMAND, CONSUMER TRUST

The acceleration of deliveries, as well as strong demand for Connected Fitness products and low churn levels, helped boost Peloton revenue 141% year-over-year to $1.26 billion. 

Revenue for the Connected Fitness segment was $1.02 billion, representing 140% year-over-year growth and 81% of total revenue, and subscription revenue grew to $239.4 million, representing 144% year-over-year.

Peloton narrowed its losses to $8.6 million, or 3 cents per share, compared to $55.6 million, or 20 cents per share, a year ago.

PELOTON'S SECURITY GLITCH POTENTIALLY EXPOSED SENSITIVE MEMBER DATA

The company ended the quarter with 2.08 million Connected Fitness subscriptions, up 135% year-over-year. Connected fitness subscribers are people who own a Peloton product and also pay a monthly fee for access to the company’s digital workout content. 

Digital subscriptions – sans equipment – surged 404% to 891,000.

Within the Connected subscriptions, Peloton saw its members tap into 149.5 million works – an all-time high – and an increase of 239% over a year ago. 

The pandemic certainly aided the uptick in workout usage. Last year Peloton members averaged 17.7 workouts compared to 26 this year. Also, the company saw its lowest amount of customer turnover ever with its churn rate hitting a record low of 0.31% 

Peloton has been adding new content, such as barre and Pilates classes, in an effort to keep its customers engaged. In addition, the company is preparing to expand its offerings to Australia later this year.

"While progress has been made, additional work remains to reduce delivery times across the remainder of our product portfolio and regions," Chief Executive John Foley said in a letter to shareholders Thursday

Peloton recently closed its $420 million acquisition of equipment manufacturer Precor. Peloton plans to begin limited manufacturing at Precor's North Carolina facility by the end of 2021, with a goal to ramp up production further in 2022. 

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The earnings announcement comes a day after Peloton issued a voluntary recall for its Tread+ machine following reports of a child's death and dozens of injuries. 

The U.S. Consumer Product Safety Commission urged consumers who have purchased either treadmill to immediately stop using it and contact Peloton for a full refund. The recall warns that adults, children, pets and objects are at risk of being pulled underneath the back of the treadmill "posing a risk of injury or death." 

Peloton initially pushed back after the consumer watchdog agency issued its warning. However, Peloton later announced a voluntary recall, which impacts about 125,000 Tread+ machines and roughly 1,050 Tread products in the U.S. 

Foley apologized on the company's earnings call Thursday for the issues related to the Tread+.

"Peloton made a mistake in our initial response to the Consumer Product Safety Commission's request that we recall our Tread+ product," Foley told analysts. "We should have been more open to a productive dialogue with them from the outset. As a members first organization, promptly stopping the sales of our product while we cooperated more closely with the CPSC is something we should have considered sooner. For that, I apologize."

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Going forward, the company will halt sales of its treadmills while the CPSC conducts its review. 

"While this process typically takes six to eight weeks, it could take longer," Foley added. "So we can't offer an on sale or revise launch date at this time."

For the full fiscal year, Peloton expects total revenue of $4 billion and average net monthly connected fitness churn under 0.85%, an increase from the third quarter due to typical seasonality observed in warmer months of the year. The churn estimate excludes the impact of customers returning Tread and Tread+ machines. 

The revenue impact from the Tread and Tread+ recall is expected to be approximately $165 million, and the pause in Tread and Tread+ deliveries will negatively impact Peloton's revenue by approximately $105 million, according to chief financial officer Jill Woodworth.

Peloton will also be waiving monthly all-access subscriptions for its Tread and Tread+ members for three months, resulting in an estimated subscription revenue impacted of approximately $10 million in the fourth quarter.

Ticker	Security	Last	Change	Change %
PTON	PELOTON INTERACTIVE INC.	4.53	-0.24	-5.03%

Shares fell more than 4% in after-hours trading following the earnings announcement.