Peloton Interactive Inc. (PTON) is a fitness company that provides an interactive fitness platform. It offers connected exercise equipment, including stationary bikes, treadmills, free weights, related fitness accessories, and branded apparel.

Its equipment connects to the company’s online interactive platform, enabling users to engage in live or on-demand fitness classes and track a range of fitness metrics. Peloton generates revenue through the sale of its fitness products and through subscription fees for membership to its digital interactive platform.

Peloton operates in a highly competitive environment in which it competes with fitness clubs as well as companies that offer in-studio fitness classes, at-home fitness equipment, and health and wellness apps. Some of its main competitors include Life Fitness, Equinox Group’s SoulCycle, NordicTrack, Echelon, and Bowflex.

Key Takeaways

  • Peloton offers an interactive fitness platform that includes connected fitness equipment and live and on-demand fitness classes.
  • Peloton’s two business segments are its Connected Fitness Products segment and its Subscription segment.
  • Its Subscription segment generates the majority of the revenues and all of the profits.
  • The company relaunched itself in 2023 with a new brand identity, positioning itself as more than just an in-home bike company.

Peloton’s Financials

On May 4, 2023, Peloton released its financial results for Q3 of its 2023 fiscal year (FY), the three-month period ending March 31, 2023. The company reported a net loss of $276 million, a significant improvement compared to the net loss of $755 million posted in the same quarter the previous year. Revenue for the quarter dropped 22.3% year-over-year (YOY) to $749 million.

The company’s drop in revenues is due to declining membership. In Q3 2022, the company had 7 million members, in Q3 2023, it had 6.7 million members. The Connected Fitness subscriptions segment saw an increase in cancellations from 2.96 million in Q2 2022 to 3.1 million in Q3 2023. Additions to the Connected Fitness subscriptions also dropped, going from 195,000 in Q2 2022 to 74,000 in Q3 2023. Though its Connected Fitness segment has dropped 45% in revenue year over year, its Subscription revenue has increased by 15%.

Peloton’s Business Segments

Peloton has two reportable business segments: Connected Fitness Products and Subscription. It provides a breakdown of revenue and gross profit for each of these segments.

Connected Fitness Products

The Connected Fitness Products segment generates revenue from sales of Peloton’s various connected fitness products, including its stationary bikes, treadmills, and free weights. It also derives revenue from related fitness accessories and branded apparel, delivery and installation services, and extended warranty agreements.

The segment’s revenue fell 45% YOY to $324 million in Q3 2023. Gross profit improved from a loss of $67.9 million in Q3 2022 to a loss of $17.6 million in Q3 2023. The Connected Fitness Products segment’s revenue contributed 43.2% to Peloton’s total revenue. As its gross profit from this segment was a loss, it did not contribute to total gross profit.

Subscription

The Subscription segment primarily generates revenue from monthly subscription fees to Peloton’s online interactive fitness platform, which offers live and on-demand fitness classes and allows users to track various fitness metrics over time.

Revenue for the segment rose 14.8% YOY to $424.7 million in Q3 2023. Gross profit grew 14.16% compared to the year-ago quarter to $287.8 million. Subscription revenue accounts for about 56.7% of companywide revenue while Subscription gross profit comprises 100% of Peloton’s total gross profit.

Peloton’s Recent Developments

In May 2023, Peloton relaunched itself with a repositioning away from an in-home bike company to showcasing everything it has to offer. It launched a new brand identity with a new brand campaign, which saw an introduction of new membership tiers and a new content feature called Peloton Gym.

In April 2023, Peloton and Hilton expanded their partnership to new regions, which include Puerto Rico, Germany, the U.K., and Canada, which involves Hilton Hotels featuring Peloton bikes into their hotels in these regions. This is an expansion from the start of the partnership in Oct. 2022.

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