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Peloton $PTON 3Q22 Earnings - 
- Rev $964m -24%
- GP $184m -59% margin 19% -1614 bps
- Adj EBITDA $-194m margin -20% -2512 bps
- NG Net Inc -$757m margin -79% -7783 bps
- OCF -$670m margin -69% -5751 bps
- FCF -$747m margin -77% -6127 bps
- Rev $964m -24%
- GP $184m -59%
margin 19% -1614 bps - Adj EBITDA $-194m
margin -20% -2512 bps - NG Net Inc -$757m
margin -79% -7783 bps - OCF -$670m
margin -69% -5751 bps - FCF -$747m
margin -77% -6127 bps
Connected Fitness
- Rev $594m -42%
- Gross Profit $-68m margin -11% -3981 bps 
Subscription
- Rev $370m +55%
- Gross Profit $252m +63% margin 68% +362 bps 
- Rev $594m -42%
- Gross Profit $-68m
margin -11% -3981 bps Subscription
- Rev $370m +55%
- Gross Profit $252m +63%
margin 68% +362 bps
Business Metrics
- Members 7.0m +29%
- CF Subs 2.9m +42% + 195k 
- Digital Subs 976k +10%
- Workouts 184m +8%
- Avg Workout per CF Sub 18.8 -28%
- Average Net Monthly CF Churn 0.75%
- Members 7.0m +29%
- CF Subs 2.9m +42%
+ 195k - Digital Subs 976k +10%
- Workouts 184m +8%
- Avg Workout per CF Sub 18.8 -28%
- Average Net Monthly CF Churn 0.75%
1 | Price Decrease in Hardware
“price increase was geared towards moving hardware… alleviating some of the stress we're seeing in inventory.
…price elasticity and have seen a significant increase in total revenue as a result of the price decrease.”
“price increase was geared towards moving hardware… alleviating some of the stress we're seeing in inventory.
…price elasticity and have seen a significant increase in total revenue as a result of the price decrease.”
2 | Excessive Inventory still going to drag
“…consistent with Q3 around managing our excess inventory. We're still going to see elevated detention and demurrage and storage costs.
“…consistent with Q3 around managing our excess inventory. We're still going to see elevated detention and demurrage and storage costs.
3 | Through FY23 to sell down
to sell through your existing inventory. I think we will broadcast our inventory position at this juncture. But it will take us through fiscal '23 to sell down.
to sell through your existing inventory. I think we will broadcast our inventory position at this juncture. But it will take us through fiscal '23 to sell down.
4 | Lots of Past Issues to Fix
- Order Management System
- Accounting-related System
- Order Management System
- Accounting-related System
5 | Fitness as a Service (FaaS)
“FaaS will be a complement to our business….who want to own the bike outright, and we're delighted to sell it to them…there's others…cost of entry poses a barrier…~53% of our customers YTD…household incomes of less than $100,000.”
“FaaS will be a complement to our business….who want to own the bike outright, and we're delighted to sell it to them…there's others…cost of entry poses a barrier…~53% of our customers YTD…household incomes of less than $100,000.”
6 | Still testing
“We need to test our way into an understanding of that as well as an economic model that enables us to earn an attractive return on investment.”
“We need to test our way into an understanding of that as well as an economic model that enables us to earn an attractive return on investment.”
7 | Fully live with A/B test by end June
“The total number of units that we placed is still relatively small on the order of 1,000…looking to aggressively expand the test on our e-commerce platform…we'll be fully live with the A/B test in-- by the end of June.“
“The total number of units that we placed is still relatively small on the order of 1,000…looking to aggressively expand the test on our e-commerce platform…we'll be fully live with the A/B test in-- by the end of June.“
8 | Price Increases from $39 to $44
“We saw a very small increase in cancellations when we announced the price increase, one of all-access service from $39 to $44. But the price change doesn't actually hit until June 1.
“We saw a very small increase in cancellations when we announced the price increase, one of all-access service from $39 to $44. But the price change doesn't actually hit until June 1.
8 | cont’d
And so we're still a little bit uncertain about what-- when the dust settles, the churn impact will be to date. I would say it's been quite small.
And so we're still a little bit uncertain about what-- when the dust settles, the churn impact will be to date. I would say it's been quite small.
9 | Focus to get to Positive FCF by FY23
“with respect to free cash flow, the objective here is to get the business to positive free cash flow in FY '23, just full stop. And with the money that we raised in the term loan, I'm very confident.”
“with respect to free cash flow, the objective here is to get the business to positive free cash flow in FY '23, just full stop. And with the money that we raised in the term loan, I'm very confident.”
10 | Just need to fix it.
“We understand what the issues are now, and we'll get the kind of expertise we need in-house to get it fixed. These are not unsolvable problems. They're not problems that companies like us haven't seen.”
“We understand what the issues are now, and we'll get the kind of expertise we need in-house to get it fixed. These are not unsolvable problems. They're not problems that companies like us haven't seen.”
10 | cont’d
“We just have to get our arms around it, and fix it. Then 12 months, we'll be in a much better place than we are today. So they don't threaten the business. It just slows us down, and we move a little slower than we would like to as a consequence.”
“We just have to get our arms around it, and fix it. Then 12 months, we'll be in a much better place than we are today. So they don't threaten the business. It just slows us down, and we move a little slower than we would like to as a consequence.”
11 | Still feeling optimistic
“…feeling pretty optimistic about the path ahead and the number of levers that we have to turn to improve the operating performance of the business.”
“…feeling pretty optimistic about the path ahead and the number of levers that we have to turn to improve the operating performance of the business.”
12 | Turning point?
“I don't mean to sound pollyannish, but I'm hopeful that, someday soon, we're going to look back on this call as one of the important turning points in the business.”
“I don't mean to sound pollyannish, but I'm hopeful that, someday soon, we're going to look back on this call as one of the important turning points in the business.”
Final Takeaways on Peloton $PTON:Barry is aware of what to fix and how to fix. Will take time and need to be patient. Churn remains low despite price increases. Just need to work through inventory sell down, might take through FY23. Focus on positive FCF for FY23.
Watching fitness as a service. With the sub business being a $1.5bn ARR business and still growing at +55%YoY with 68% GPM selling for $4bn market cap. I am rooting for them to turn it around. Still holding, not adding (yet).
