PTON Q1 2021 (9/30/2021) Results

Revenue $757.9m +232% YoY
Subscription Rev $156.5m (21% of total rev) +133% YoY
Gross Profit $328.7m +214% YoY
Gross Margin 43.4% (Connected 39.4%, Subscription 58.5%)
Net Income $69.3m
EBITDA $118.9m, 15.7% margin

Subscriptions -
Connected Fitness 1.33m +137% YoY
Digital 510k +382% YoY
Churn 0.65%

Workouts per Sub 20.7, slightly lower than prior Q of 24.7, significantly higher than prior Y of 11.7

No mention of current backlog (was $230m from prior Q)

Guidance for Q2
Revenue $1b +115%
Gross Margin 39% (lower due to projected shipping related expenses)
EBITDA $70m or 7% margin
Connected Fitness 1.63m +129%
Churn < 0.85%

Sounding like they see an opportunity for investment (for this quarter, R&D up 110%, Marketing up 48%) as revenue and subscriptions will continue to grow but EBITDA is being guided down. Will be interested to see if they discuss backlog/demand on the call


Ever since AYX I have been wary of YoY figures. In the case of AYX those figures hid rapidly slowing growth. For PTON they had a very successful 2Q20 (3 quarters ago) which inflates the YoY figure for the next 3 quarters, masking what is going on.

The QoQ figures show accelerating growth. From what I have cobbled together:

      QoQ      Annualised   Forecast
2Q20  104.5%   1649.5%
3Q20   12.5%   60.2%
4Q20   15.7%   79.4%
1Q21   24.8%   142.9%       19.4%
2Q21           202.7%       31.9%

The current quarter’s 24.8% growth annualised is 142.9%!

The next quarter’s forecast of 31.9% growth annualised is 202.7%! And they will likely beat that!

I dipped into PTON a few weeks ago but based on the growth story made it my 4th largest position yesterday after selling out of DDOG (slowing growth).



Forgot to post this bit - they also revised FY21 guidance up versus guidance from prior quarter’s press release

Revenue from high of $3.65B to $3.9B+, or +110% YoY
EBITDA from high of $275m to $300m, or 7.7% margin
Subscriptions (Connected only) from 2.1m to 2.17m, or +99% YoY
Gross Margin steady at 41%
Churn reduced from < 1% to < 0.9%


I think your point regarding masking of slowing growth is only pertinent to 1/5 of Peloton’s current business (the subscriptions), as currently 80% of its revenues are hardware related. It’s hard for the company to “mask” decelerating growth from a revenue perspective since they are physical deliveries (you can’t assume you will “keep” the revenue for next quarter). This is imo what has kept Saul away (hard to continue to find a new customer to sell a widget to, much easier to keep recurring revenue if it’s a subscription)

I would say that’s where the backlog comes into play (I think of this as the equivalent of “billings” for subscription companies). Biggest risk is a slow down in demand/fad, but at only 1.3m units currently (2m projected by 6/30/22) and the increased guidance, I think there’s still a lot of room to grow over the next year.

I’m very bullish on the company because even if you took away the hardware and just looked at the subscription revenue of $156m, you’re talking about a company priced at 37B with 600m annualized rev growing at 133% YoY, which seems fair when compared to the alternatives out there. Just my two cents



(This is at a glance. I plan to dive in and read it all as soon as possible…)


  • Connected Fitness Subscriptions grew 137% to over 1.33 million
  • Paid Digital Subscriptions grew 382% to over 510,000;
  • total Members grew to over 3.6 million

Based on these numbers they have about 1.8M unpaid members? Looking at the website there are only 30-day free trials, but no free tier. Is it possible these are all 30-day free trials??

The only part that makes me sad is that 39% GM. The thesis here is this will improve as they get more members using the same content on the digital side, but still…they have to earn twice as much revenue as some of our other companies to get the same earnings. Hopefully we see the subscription margin climb from 58.5% each quarter. However, the full year forecast for GM is only 41% and this is only the first quarter. I’m calling this a red flag to watch. Another measure of this aspect to watch: Q1 Net Income was $69.3 million off $1 billion. This breaks down to (leaving all caps from copy-and-paste):

- TOTAL OPERATING EXPENSES:   $259.8 million 34.3% of revenue
- SALES AND MARKETING:        $114.6 million 15.1% of revenue
- GENERAL AND ADMINISTRATIVE: $108.6 million 14.3% of revenue
- RESEARCH AND DEVELOPMENT:    $36.6 million  4.8% of revenue


The investment (bull) thesis here is

  • accelerating total rev and subs rev growth
  • tripple digit subs rev growth
  • 4b annual revs/800-900m subs annual revs
  • remaining long runaway for growth
  • profitable, with increasing profitability

How much would that be worth? I guess 50b cap is reasonable vs today‘s after market around 35b. 40% upside at hand.

Yes, gadget/hardware, relatively low gross margin in the 40s, but subs revs soon will reach 1b. If u apply 50x multiple, u get rest for free.



Hi 5th Horseman,

Thanks for posting. I look at sequential growth as well and like how you formatted the numbers.

Visualizing Q2’s $150.8M increase in addition to Q1’s $82.5M increase helps me to navigate the lumpiness in quarters: Q2’s 469% and Q4’s $238M increase.

I agree with Alphalite and am interested in the backlog. Ordered my wife a bike last month, set to arrive Dec 11th. I wonder how many people are hoping for deliveries before Christmas.

Digital subscriptions grew 61% from 316,800 to 510,000 in one quarter. 194,000 new members of recurring revenue without hardware. Some of these may be waiting on new bikes.


Rafes, GM is in high 30s temporary as they take additional shipping expense to bring more bikes from Taiwan for Christmas :). I‘d count low 40 as normal GM (at least for now) and subs GM should trend to 60s. If we take mid/long term approach GM would be going up as subs revs will become bigger piece of the cake.

  • total Members grew to over 3.6 million

Based on these numbers they have about 1.8M unpaid members? Looking at the website there are only 30-day free trials, but no free tier. Is it possible these are all 30-day free trials??

It is more likely the most part of the 1.8m unpaid members is from a household that has a paid subscription. In my household I purchased the subscription but my wife and 2 kids created member profiles within my subsciption.


Hi Rafe,

When Peloton mentions Members, it’s anyone who has an account - this can include free trial subscribers, but they also allow multiple members for each piece of hardware, so for example a husband and wife make up two members for one Connected Fitness subscription, and you could even have an apartment gym with one Connected Fitness subscription but many different Members. Hope that helps


I agree that this report looks fantastic. However, PTON is down 7% in AH trading. The press says that Wall Street doesn’t like the supply constraints. But with a billion dollars expected in sales in the holiday quarter, lockdowns in Europe, and potential lockdowns in the US – this seems like an overreaction to me?

Peloton said it hopes to meet normalized order-to-delivery windows for its bikes by the end of the calendar year but that wait times for its Bike+ “will likely be elevated for the next couple of quarters.”

They literally can’t meet demand going into the next couple of quarters and will still sell a billion dollars worth of product this quarter. What’s not to like?


I would rather have 3 months of backed orders and worry about ramping up production than be trying to find more customers. I just ordered one today for me and my wife and won’t be able to get it until January 30!


“GM is in high 30s temporary as they take additional shipping expense to bring more bikes from Taiwan for Christmas :). I‘d count low 40 as normal GM (at least for now) and subs GM should trend to 60s. If we take mid/long term approach GM would be going up as subs revs will become bigger piece of the cake.”

Hi LearningInvest0r, you illustrate why I called this “a red flag to watch”. The FULL fiscal year guidance is low 40s and there are still 3 more quarters (this was just the first quarter). If this quarter’s GM is lower for one-time reasons that is actually worse. It means they expect NO improvement over the next 9 months! Part of my investing thesis is that they will grow subscriptions, which are higher margin, and the GM will improve at both the subscription segment and as a percent of the total GM. If they are growing above 100% overall and much much more than that in the subscription area, then why wouldn’t they expect much better operating leverage? Even if they are sandbagging this is a big problem to me. Please poke holes in this thinking if you can.


Ultimately it means in the short term they have a constraint on growth if they can’t meet demand. But I expect PTON to climb after the short term reactions.

Apple’s gross margins are the same or lower than Peloton’s. Meanwhile AYX has the highest margins in all of business or near so at 92% and Pure Storage, as an example, has the highest gross margins in its industry. Yet, I see no correlation between high gross margins and stock return. Twilio’s gross margins have always been the lowest in the SaaS industry, complained about by many, and yet has hardly diminished stock return. Gross margin appears to give little in regard to correlation to stock return.

History of Apple’s margins…



Hi Rafes,

correct me if I’m wrong, but if they guide for low 40’s margin, and in Q1 it is around 39, then it should improve over the course of the year, even more if they are sandbagging, in order to reach their forecast, should it not?

Anyway, looking ONLY at their subscription revenues, it is 156.5m, growing at 130% YoY with 58.5% GM, and with the entire PTON currently valued at $37 billion.

Compare this to say, Datadog, which will post on 11-10 let’s say between 150m-165m revenue representing 57% to 72% YoY growth with a continued GM of 80% and presently valued at $31 billion. (The reason for this revenue growth range is that they usually add 17 million QoQ revenue, plus a generous upside margin to reach +25 million QoQ.)

Wouldn’t you think that the lower margins of PTON subscription revenue (25% lower than DDOG) is more than compensated by its growth rate (double of DDOG at midpoint), and that in fact based on subscription revenue alone, PTON should be valued the same as DDOG?

In such a case, the hardware part of the business which represents 80% of the revenue ($600 million, as total revenue is $758m) and growing well above 100% with margins a little below 40% would be valued at a paltry $6 billion…

The whole package seems like a bargain to me. I think it also stems from the fact that growth is so much more valuable than margins, and even then PTON’s margins are nothing to be ashamed of.

The backlog is more worrying to me, as people might get fed up with the delays. Nevertheless, countering that fear is that even bigger tailwinds await: return to partial lockdowns, Christmas presents, New Year’s fitness resolutions, and the checked fact that regular people giving a go at a Peloton spinbike quickly find themselves in the shape of their lives (check YouTube!)

Yes the bike looks pricey, but the return in terms of fitness is apparently incredible; it is fun; the spin bike is one of the best; the below $80 monthly fee seems to me as digestable by gym-goers.

This post is longer than I wanted, but I hope it has been useful to you and others. After all, I just began investing according to this board’s principles. Forgive me if it does not add anything.

Best regards



Rafes, yes, in principle reduction of GM is more negative than positive. The reasons here are

"The strong reception of Bike+, combined with challenges
associated with port congestion and COVID-19-related
warehouse closures, impacted Bike+ delivery dates for
many of our customers and caused significant Member
experience challenges. Therefore, we are incurring
additional shipping-related expenses in Q2 to alleviate
some of the delays ahead of the Holiday period . As a result,
we expect Q2 gross margin to temporarily decline to about
39%, implying a Connected Fitness Product Gross Margin
of 35% and Subscription Contribution Margin of 63%. "

For next year GM will be in low 40s, the reason is

"For FY 2021 our gross margin guidance remains
unchanged at approximately 41%. We continue to expect
Connected Fitness Product Gross Margin to decline
year-over-year to approximately 36%, driven primarily by
our recent Bike price reduction and continued mix shift to
Tread . We continue to expect Subscription Contribution
Margin in FY 2021 to be roughly flat year-over-year. We
expect leverage in fixed costs of content production to be
offset by elevated engagement levels, higher penetration
of Digital Subscriptions, and continued fitness and
wellness programming investments.

We anticipate that year-over-year declines in our gross
margins will be OFFSET by significant year-on-year
leverage in sales and marketing expense and general and
administrative expense ."

To sum-up the trend is for GM to go down to low 40s and stabilize there at least for the moment. Last quarter GM was 46.7%.

On the other hand - lowering prices allows for more sales to lower income customers catching also middle (and lower?) market. Shift to Tread allows another revenue stream in addition to bike. So, the decision is right from business perspective.

As Tinker said - Apple GM is even lower than Peloton’s. Considering current revenue growth as well as subscription revenue growth I’m not significantly concerned with low 40s GM at the moment.


As others have noted, a low GM is not strictly a bad thing if the growth is there to compensate for it. But one thing that I haven’t seen pointed out with overall gross margin is that it would be a TERRIBLE sign for this company if GM is projected to climb

They disclose that hardware segment GM is 39%, and subscription segment GM is 59%. If GM climbs it means subscription is becoming a bigger part of the business. Well that sounds dandy right? It’s exactly what we’re looking for from our companies correct?

But this would be a sign that demand is tailoring off! The subscription count is a lagging indicator of user demand, especially with the current backlog. If anything, as an investor you’d want overall GM to stick as close to the hardware segment as possible for as long as possible.

Subscriptions are almost guaranteed to follow hardware ownership count, after all, you wouldn’t pay $2000-$5000 for a Peloton without signing up for the “gym membership” portion of the product. And as mentioned several times in the thread already, even evaluating solely on the subscription portion of the company, the current market price seems fair.


But this would be a sign that demand is tailoring off! The subscription count is a lagging indicator of user demand, especially with the current backlog. If anything, as an investor you’d want overall GM to stick as close to the hardware segment as possible for as long as possible.

This uncertainty is why I haven’t jumped on PTON. Congrats to all who made money doing so (so far) but the whole thing smells like a) a fad; b) a market timing exercise. PTON sounds like their products are taking the world by storm, but it’s really a very small slice of the total population. There is no knowing when the fad subsides, when people stop using it the same way people stop using their new gym memberships every year.

In short, never count on the public to want to exercise… :smiley:


I have been watching PTON for some time now. The reason I never invested is because PTON has the feel of a FitBit or GoPro, which were eating the world until they hit a wall. Could be entirely wrong, but that’s what has been holding me back.
No position as of now


Hi Jille,

I understand the sentiment. Key difference is the customer investment. It’s a lot harder to change your mind once you’ve invested 3k in your exercise plans. I would assume a large percentage of their customers make payments on their bike vs paying if full up from. That at least retains their customers for the duration of the contract (39 months I think). That’s a lot different than buying a $150 Fitbit. Another difference is that a Fitbit user wants to track steps and calorie counts when doing activities, including at the gym. PTON replaces a gym for many.

You may absolutely be correct about PTON’s success being temporary, but it will most likely be at least several quarters away (if it happens) and there will be plenty of time to get out.