Peloton posted fiscal third-quarter earnings results that beat Wall Street estimates on revenue.
The enterprise touted better-than-expected equipment sales, subscription revenue and profitability.
CEO Peter Stern told CNBC that the firm believes raising prices on its subscriptions was a value-driven move.
Peloton posted fiscal third-quarter results Thursday that beat Wall Street expectations on revenue and revealed a narrow earnings for the first three months of the year.
The firm touted better-than-expected equipment sales and subscription revenue as helping to drive its sales and profitability, with free cash flow up nearly 60%.
Shares of Peloton rose roughly 3% in morning trading after being as high as 13% following the report.
“The first order of business in earnings is reporting how you did financially, and we feel like that was a pretty excellent quarter in terms of where we are strategically,” CEO Peter Stern told CNBC.
Here’s how the business performed in its quarter ended March 31, compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Revenue: $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, up from a depletion of $47.7 million, or 12 cents per share, in the year-ago period. Sales came in at $630.9 million, up roughly 1% from $624 million a year earlier. This also touches on aspects of investors.
For the full fiscal year, Peloton commented it projects total revenue of between $2.42 billion and $2.44 billion, lifting the lower end of the guidance range it provided last quarter.
The corporation saw revenue for its connected fitness subscriptions come in at $202.9 million, down from $205.5 million a year prior, but beating estimates of $196 million, according to StreetAccount. Subscription revenue also topped estimates and grew 2% year over year, reaching $428 million.
“Some of the vectors that are at play this quarter, and will be in the future, are selling additional equipment to our existing members,” Stern mentioned on a call with analysts. “That doesn’t generate more subscriptions, but it does generate revenue.”
The connected fitness organization has been struggling with weak performance and sluggish sales, previously projecting that performance to extend into this quarter. It’s tried to revamp its product assortment and recently raised prices on both its equipment and subscription plans.
Stern noted Peloton feels its pricing changes were appropriate.
“We’re really sensitive to the fact that individuals feel stress in this economic environment, and it’s impacting different humans in really different ways,” Stern told CNBC. “That being stated, we feel like the price changes that we made in Q2 – it was time. We had added a tremendous amount of value over the succeeding three or four years since we previously made any change in our subscription prices.”
Peloton has also been inking novel partnerships and trying fresh strategies to win back customers. Last month, Peloton revealed a deal with Spotify, making more than 1,400 Peloton classes available to Spotify Premium subscribers. It also launched its first Bike and Tread products for high-traffic gym floors in March.
Stern added that the enterprise had already factored the Spotify deal into its revenue guidance because it had been in the works for “a long time.” Peloton also does not count Spotify users toward its subscribers.
“We’re really excited about our deal with Spotify, that allows us to reach Peloton members in a lot more countries and is also a high-margin revenue [stream] for us,” Stern mentioned.
On a call with analysts on Thursday, Stern commented Peloton now expects tariffs to represent roughly $30 million of free cash flow exposure for the full year, down from a previous expectation of $45 million.
“I was very pleased that we were able to deliver a Q3 with positive revenue growth, and while we won’t see that likely sustain in Q4 based on our implied guidance for the quarter, I think we’re now in a stage where hopefully we’ll see some steps forward and some steps back as we right the ship,” Stern noted.
