The Peloton posted third-quarter financial results on Thursday that beat Wall Street expectations for revenue and posted a smaller profit for the first three months of the year.
The company cited better-than-expected device sales and subscription revenue as helping to drive its sales and profits, with free cash flow up nearly 60%.
Peloton shares rose nearly 6% in midday trading after rising as much as 13% following the report.
“The first order of business in earnings reports how you did financially, and we feel like that was a very good quarter in terms of where we are strategically,” CEO Peter Stern told CNBC.
Here’s how the company performed in its quarter ended March 31, compared to Wall Street’s expectations, based on a survey of analysts by LSEG:
- Earnings per share: 6 cents vs. 7 cents expected
- Net worth: $630.9 million vs. $617.6 million expected
The company’s net income for the quarter was $26.4 million, or 6 cents per share, from a loss of $47.7 million, or 12 cents per share, in the prior period. Sales came in at $630.9 million, up about 1% from $624 million last year.
For the full fiscal year, Peloton said it projects revenue between $2.42 billion and $2.44 billion, which raised the low end of the guidance range it provided last quarter.
The company saw its connected fitness subscription revenue come in at $202.9 million, down from $205.5 million last year, but beating estimates of $196 million, according to StreetAccount. Subscription revenue also topped estimates and grew 2% year-over-year, to $428 million.
The number of paid connected fitness subscribers, however, fell year-over-year to 2.66 million.
“Some vectors that are playing this quarter, and will be next, are selling more equipment to our existing members,” Stern said on a call with analysts. “That doesn’t generate more subscriptions, but it generates revenue.”
The connected fitness company has been struggling with weak performance and sluggish sales, which was previously expected to improve this quarter. It has tried to revamp its product range and recently raised prices on both its equipment and subscription plans.
Stern said Peloton felt the price changes were appropriate.
“We’re very sympathetic to the fact that people are feeling pressure in this economic climate, and it’s affecting different people in very different ways,” Stern told CNBC. “That being said, we feel like the price changes we made in Q2 – it was time. We’ve added a lot more value over the next three or four years since we made any changes to our subscription prices.”
Peloton also entered new partnerships and tried new strategies to acquire customers. Last month, Peloton announced a deal with him Spotifymaking over 1,400 Peloton classes available to Spotify Premium subscribers. It also launched its first Bike and Tread products for mass-market gyms in March.
Stern added that the company has already factored the Spotify deal into its revenue guidance because it has been in the works for “a long time.” Peloton also does not count Spotify users among its subscribers.
“We are very excited about our agreement with Spotify, which allows us to reach Peloton members in many countries and is a great advantage. [stream] I said,” said Stern.
On a call with analysts Thursday, Stern said Peloton now expects the pricing to represent about $30 million of free cash flow exposure for the full year, down from expectations of $45 million.
“I’m very pleased that we were able to deliver a positive Q3, and while we won’t see what may continue in Q4 based on our guidance for the quarter, I think we’re now at a stage where hopefully we’ll see some steps forward and some steps back as we right the ship,” Stern said.
