Peloton IPO - revenue growth

Peloton just announced their IPO, S1 here:…

What do they do:

  1. Sell crazy expensive indoor bikes (~$2-3000) and a new connected treadmill (Tread).
  2. Sell subscriptions ($39/month) to various exercise classes to use said bikes and treadmills (and other classes). Theres a lot of classes, and the instructors are (reputedly) excellent.
  3. Provide a community where you can compete against others, compare yourself to age groups etc

This is all pretty positive:…


  1. “Connected Fitness Subscriber base grew by 108% in fiscal 2019”
  2. Great revenue growth
  3. Expenses rocketing up - G&A in particular.
  4. It’s pretty easy to find pretty enthused users.
  5. A bunch of competitors springing up - winner take most market? (I know people who like Zwift, but they’re cyclists, rather than spin-types)
  6. Looking to international expansion - expensive?
  7. Too early to see any leverage, but… I guess they just need to add 24/7 live classes to service the world?

Impressive revenue growth:

				2017	2018	2019
Connected Fitness Products	183.5	348.6	719.2
					90%	106%
Subscription			32.5	80.3	181.1
					147%	126%
Other				2.6	6.2	14.7
					138%	137%
Total revenue			218.6	435	915
					99%	110%

and equally impressive growth in expenses:

Cost of revenue:	  	2017	2018	2019	
Connected Fitness Products	113.5	195	410.8
					72%	111%
Subscription			29.3	45.5	103.7
					55%	128%
Other				1.9	4.9	17
					158%	247%
Total cost of revenue		144.7	245.4	531.4
					70%	117%
Gross profit			73.9	189.6	383.6
					157%	102%
Research and development	13	23.4	54.8
					80%	134%
Sales and marketing		86	151.4	324
					76%	114%
General and administrative	45.6	62.4	207
					37%	232%
Total operating expenses	144.7	237.1	585.8
					64%	147%

I have no idea what to think of this one. Still looking at the S1, its… interesting. Potentially a huge TAM, and $39/month is much cheaper than a (normal) gym/class membership.

Anyone have thoughts/experience with Peloton?



We have one, it is very well done and the classes are indeed good quality. You can do live classes or just pick from a library of pre recorded videos that still have some social component to it (they show a leaderboard that I assume is synced to previous riders).

My wife is a spin enthusiast so I got it for her when it became clear the travel to and from spin was too much. Being able to hop on at any time for even just a 20 or 30 minute ride is really convenient. Over the course of a few years it will be cheaper than a spin membership.

The company is clearly trying to expand its ecosystem with the treadmill. The have an app that provides some exercise instruction with weights and stretching. I understand it is difficult to convince someone to spend $2000 on a bike but they do provide financing. From what I read, the users generally love it and have a strong community feeling. Overall I am happy with the purchase and will continue to pay the monthly subscription. I do think they could expand more by leasing the equipment. It seems they are spending a lot of money in high end malls to attract more clients. I think a good idea would be to install them in nicer hotel gyms.


FWIW, love the product; as do several close family members. It’s addictive.

Separately, in the wake of the S-1, Tren Griffin and others have had some interesting dialogue on Pel’s CAC and the similarity of margins on the hardware and software (suggesting that recurring subscription may not have explosive growth potential).


I will be watching this with interest. We do have one of these bikes, and my wife has put in 150 rides over the past 6 months. It’s an extremely well built bike, the classes are for all levels, and the motivation of live classes and a team spirit brings the gym feeling home. Of course without the driving back and forth which is a huge time saver.

The high pricetag is definitely a barrier to entry, but as others have said over time if one goes to the gym only for spin class it will even out.

They have recently come into problems with music licensing, which while not a huge deal is a potential red flag that they may have missed some due diligence along the way in other things.

Regarding the hotel comment, many hotels already offer this, and peloton users actively seek them out - , I know from experience.


NordicTrack has a similar (and lower priced) offering with live training. I don’t see much of a moat for Pelton and I have a hard time seeing how their pricing will stick. At this price point, I would expect a fairly limited target market.…

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Yesterday, The New York Times published an article, by Tech writer Erin Griffith, about Peloton’s upcoming IPO and some challenges the company may face. It’s a good read. Here is the link:…

Here is an excerpt:

Now as Peloton prepares to go public, the New York City-based company — which investors have privately valued at $4 billion — is facing questions about how long it can stay on top. Fitness is a historically faddish category. Exercise manias, from the Thighmaster to Tae Bo, have all come and gone. SoulCycle pulled its initial public offering entirely.

For Peloton, some troublesome signs have emerged. The company’s losses have more than quadrupled in the last year. It is embroiled in legal fights over music and patents. Competitors and copycats are moving in aggressively. And the boutique spinning craze has started to wane.

Best, Swift…