Peloton’s latest financial results reveal that while many of the company’s problems haven’t disappeared, change is brewing. It has posted yet another loss in its fiscal third quarter -- this, one of $275.9 million. Revenues fell 22% to $748.9 million, with sales from its connected fitness products sinking 45%.
But all three metrics represent significant progress compared to the most recent quarter. And subscription revenue is growing nicely, up 15% to $424.7 million.
And it’s preparing a new marketing platform to spur that growth, encouraging more people to think of Peloton more as a fitness brand and less as a bike story.
“Peloton has become widely known as an at-home bike company for fitness enthusiasts,” writes Barry McCarthy, president and chief executive officer, in his quarterly letter to shareholders. “Our advertising reinforced that narrow positioning. But that’s not how today’s members experience Peloton.”
This quarter, more than half of classes -- 57% -- are not cycling-related, and 38% didn’t involve any Peloton hardware. Of its 6.7 million active members, 62% joined in some non-cycling activities, including strength training, yoga and meditation.
McCarthy plans to relaunch the brand to fix that disconnect and “better communicate the brand value proposition.” That includes a reintroduction of its app, along with a tiered membership structure. The goal is to build awareness of broad content offerings, finding whole new categories of customers.
The company also says it reached a $75 million settlement with Dish Technologies over a patent dispute.
Peloton's also showing growth in other areas, including its equipment rental plan and refurbished bikes business. It sold 7,000 used bikes and is mulling expanding the program to treadmills and rowing machines.
The rental program seems to be reaching a new crowd for the brand, which has long been seen as a workout for the affluent. Peloton’s research says that of the 47,000 people currently using the rental program, 62% wouldn’t have subscribed without financial flexibility.
Peloton also reports strong sales through Amazon, and is expanding its push into Hilton properties. In addition to the bikes it’s already installed in 5,400 Hilton properties in the U.S., it’s now adding hotels in Puerto Rico, Canada, the U.K., and Germany. The company is also promising more partnerships with other hospitality channels.
With progress that’s “two steps forward and one back,” Jonathan Komp, an analyst who follows the company for Baird, continues to give the company a neutral rating.
He notes Peloton’s quarterly results beat expectations, “supported by better-than-expected connected subscribers, stable churn, and ongoing cost reductions. And it’s making progress on stabilizing business fundamentals and pursuing potential growth drivers.”
Still, he cites low visibility and a “challenging path” to a healthier balance sheet.