PTON Earnings

Bottom line - Great Quarter but continued challenges with Supply Chain and long lead times - Margins lagged due to expedites and price reduction on flagship bike. Expect to spend $100 million on air freight and expedited ocean freight over the next 6 months.

•Q2 ending Connected Fitness Subscriptions grew 134% to
approximately 1.67 million and paid Digital Subscriptions
grew 472% to approximately 625,000; total Members grew
to over 4.4 million

• Q2 total revenue grew 128% to $1,064.8 million

• Q2 Connected Fitness Subscription Workouts grew 303%
to over 98.1 million, averaging 21.1 Monthly Workouts per
Connected Fitness Subscription, versus 12.6 in the year ago period

• Q2 Average Net Monthly Connected Fitness Churn was
0.76%; Q2 12-month retention rate was 92%

• Q2 Gross Margin was 39.9%; Connected Fitness Product
Gross Margin was 35.3%, Subscription Gross Margin was
60.3%, and Subscription Contribution Margin was 65.3%

• Q2 Net Income was $63.6 million, $0.18 per diluted share;
Q2 Adjusted EBITDA was $116.9 million, representing an
Adjusted EBITDA Margin of 11.0%

• FY 2021 Q3 guidance:
– 1.980 million ending Connected Fitness
– Average Net Monthly Connected Fitness Churn
under 0.75%
– $1.10 billion total revenue
– Gross profit margin of approximately 35%
– $10 million Adjusted EBITDA
• Revised Full FY 2021 guidance:
– 2.275 million or more ending Connected Fitness
– Average Net Monthly Connected Fitness Churn
under 0.80%
– $4.075 billion or more total revenue
– Gross profit margin of approximately 39%
– $300 million or more Adjusted EBITDA

• 2.275 million or more ending Connected
Fitness Subscriptions
• Average Net Monthly Connected Fitness
Churn under 0.80%
• $4.075 billion or more total revenue
• Gross profit margin of approximately 39%
• $300 million or more Adjusted EBITDA……


Q2 21
Total Revenue $1,064.8 million +128%

  • Connected Fitness revenue $870.1 million, +124% YoY (82% of total revenue)
  • Subscription Rev $194.7 million +152% YoY (18% of total revenue)
  • Gross profit $424.8 million +115% YoY (39.9% of revenue)
  • Subscription gross profit $117.5 million, +163% YoY
  • Gross Margin 39.9% (Connected 35.3%, Subscription 60.3%)
  • Connected margin was down due to Peloton Bike price reduction and expedited shipping costs.
  • Subscription Contribution Margin 65.3%
  • Net Income $63.6 million, $0.18 per diluted share
  • EBITDA $116.9 million, 11.0% margin
  • $2.1 billion in liquidity


  • Connected Fitness 1.67m +134% YoY
  • Churn 0.76%; Q2 12-month retention rate was 92%

Workouts per Sub 21.1

Manufacturing capacity increased 6x

  • Port of LA offload time 4 weeks at this time
  • Committing $100 million to air freight and expedited ocean freight over the next 6 months to meet demand
  • Expected wait time reduction to 4 weeks by spring
  • Making more bikes/month than in all of FY2018
  • Tread launching into UK and Canada
  • demand and interest exceeding expectations

They sounded very upbeat on the earnings call. Interest and demand for tread in new markets (UK and Canada) is exceeding expectations. Word of mouth has driven demand very well, but expect to get more “offensive” and increase marketing spend this year. At the end of the call, John Foley apologized for shipping related wait times and thanked both the subscribers and Peloton team member. Definitely sounds like a customer 1st brand.

Guidance for Q3 2021

  • Revenue $1.10b
  • Gross margin 35% (lower due to projected shipping related expenses)
  • EBITDA $10m
  • Connected Fitness subs 1.98m
  • Churn <0.75%

Revised Full FY 2021 guidance

  • Total Revenue $4.075b
  • Connected Fitness subs 2.275m
  • Gross profit margin 39%
  • EBITDA $300 million
  • Churn <0.80%

Workouts per Sub 21.1

Any idea about the metric for this stat? Is it per quarter?

Thanks for the summary, FoolishJeff. I just got off the earnings call which made me feel a bit more excited about this business than I was by just looking at the numbers. This is due mainly to one thing → the tread. Discussion regarding the treadmill dominated much of the Q&A, and rightfully so. Overall, here are some of the things I liked and did not like regarding this report. Since I prefer bad news first, let’s start there.

Things I did not like:
Delay of the tread launch in US - I think this will hurt the stock price tomorrow, however, I think it is the right decision. Management decided to push back the launch date for the tread in the US from February 9 to late May. They will continue with the launch in Canada on February 9. The reason for this delay is so they can use those resources to support the demand in the UK and the upcoming demand in Canada. They would not have enough production capacity to support all three countries. More on this below.
Gross margins dropping - gross margins dropped by 385 basis points however, this was expected as they announced last quarter they were going to take a hit on margins in order to get the bikes to the new customers faster. I think this is also the right call as it is some short-term pain to ensure they keep their customers satisfied and brand strong. At the end of the day, what is most important is getting that new customer to be a long-term member of the Peloton community. I am okay with this for now as they take on additional shipping cost to get their new members their product faster and keep the customers happy.
Small revenue beat - Peloton beat guidance by 6.5% this quarter, which is up from 4.5% last quarter but I was still expecting more. I was hoping for something closer to 10% and it looks like the market was as well. At this point, we are pretty much splitting hairs but it would have been nice to see a bigger beat on the top line. I figure this was due mostly to delivery delays for the bikes.
Tread rollout will not impact 2021 fiscal year - After the delay of the tread rollout, Jill Woodworth announced that the treadmill will not have any material impact on their fiscal 2021 revenue figures. This makes sense considering the tread will not be introduced until May now, which is well into their Q4 fiscal year. This likely disappointed the market but as I mentioned above, I think it is the right call.
The lack of information given related to the Precor acquisition - I was hoping for more information about the commercial opportunity ahead of them after the acquisition of Precor made this quarter. Management clearly sounded excited about the opportunity but would not provide much clarity around the plan and impact to financial results over the coming quarters. Perhaps this is standard, especially considering the deal has not yet closed.
Added shipping cost will impact Q3 profitability - this is apparent from the Q3 guidance of $10M of adjusted EBITDA after it has been over $115M for the last three quarters each. Again, a bit of a bummer in the short-term but this is short-term pain for long-term gain. I’ll take it.

Things I did like:
Extended lead times are not causing customers to cancel orders - John Foley made it very clear that although deliveries had to be delayed and lead times are extended, they have not seen any softening of growth. It sounded to me like this has had very little impact on their demand as most customers are willing to wait for their hardware. I think this speaks to the strength of the brand.
Huge demand for the tread in the UK - Demand has far exceeded managements expectations for the treadmill that was released in the UK. This is a huge news. The tread is a far bigger market than the bike so for demand to be really strong with their initial rollout speaks very well for what is to come in the US market. However, as a result they made the decision to delay the rollout in the US because they determined they would not have the volume of product available given the robust demand seen in the UK. This is my biggest takeaway and it makes me really, really excited for fiscal year 2022 for Peloton.
Bike lead times will soon return to normal - Foley also said that their lead times will soon be back to four weeks for their bikes. This is great news. I know several folks around here were hesitant to jump on the bike wagon (see what I did there) due to the supply chain issues, but it sounds like these are beginning to dissipate slowly but surely. As an aside, Foley said they are now producing more bikes monthly than in all of 2018 combined. Pretty incredible growth.
Paid Digital Subscriptions grew 472% to approximately 625,000 - Incredible growth! Management mentioned on the call how this is one of their best lead generators and they are seeing many digital subs transition to connected fitness subs. They might be able to put me in that bucket soon. I foresee this number continuing to grow at breakneck speed over the coming quarters.
Engagement numbers - Their main engagement numbers continue to show how the much their members love the Peloton classes. Quarterly workouts reached an all time high of over 98,000 and the average monthly workouts per sub also increased QoQ to 21.1. The retention rate remained unchanged at 92%.
Management sounds really excited - between the strong demand for the tread, the robust backlog, the rapid growth of the digital subs, and the commercial opportunity from the Precor acquisition, I do not blame them. Heck, I am awfully excited about the opportunity ahead of them! This company was at the right place at the right time and had a great product to capitalize.

I would say this was a strong report, but not as strong as I had hoped. The thesis has not changed, and is still very much on course. I am really excited for what’s to come for this company.

Anecdotally, my wife and I are still loving our digital subscription. We will be moving into a house with more space next month and are talking about using an extra bedroom as a workout room. If we go this route, we will for sure purchase a Peloton tread and likely the bike as well. The digital subscription has really increased our desire to workout and I would highly recommend it. I do not think we are the only people across the globe who would like to transition to working out at home. As John Foley says, it is so much more convenient and nothing on earth is more valuable than your time.



Great quarter earning! But I am sold out of PTON and added the funds to EXPI, LPRO, FUTU.

Here are some negative signs:

-Guided $1.10 billion total revenue for 2021 Q3 only 3.3% sequential growth from last quarter.
-Gross Margin is going down hill.
-Revised Full FY 2021 guidance 4.075 billion or more total revenue. That means revenue of 1.152B for next quarter. That means a 5% sequential growth. Ouch!

I know there’s seasonality in PTON’s business. I am afraid PTON is having a ZOOM moment. This is due to drastic slow down after COVID and shipping problems which will last several quarters. This will put negative pressure on PTON stock. Maybe it’ll grow again after fully integrated Precor but how long does it take? 1 to 2 years? They said shipping problem will last several quarters. and it has almost 50B market cap. If I have better options, it’s more productive to move the funds somewhere else small cap with better growth prospects.

Here’s my current holdings and weight as of Feb 04, 2021:

Ticker Weight
EXPI 27.88%
LPRO 22.48%
CRWD 19.80%
SNOW 15.57%
FUTU 10.31%
LMND 3.97%