Peloton Gears Up For Next Chapter: Sales Beat, Apple Alum As CEO, And Strong Margin Gains

Peloton Interactive, Inc.’s PTON stock soared nearly 30% as the company not only smashed first-quarter sales estimates but also brought in a high-profile Apple Inc. veteran to lead its next chapter.

The company reported first-quarter sales of $586 million, surpassing the street estimate of $574.84 million, with quarterly earnings per share breaking even.

The company reported a GAAP net loss of $1 million, a notable improvement of $158 million year over year. Additionally, Peloton achieved a GAAP operating income of $13 million, reflecting an increase of $145 million from the same period last year.

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In the quarter, Peloton raised the recommended retail prices for its Bike and Bike+ products in international markets, particularly in Germany, where the company transitioned to a third-party retail and distribution model.

Additionally, the retail price for the Row was increased in North America, while promotional activities across the hardware portfolio were reduced year over year.

These strategic pricing adjustments, along with a shift towards higher-margin revenue streams such as Precor and bike rental products, contributed to an improved Connected Fitness Gross Margin of 9.2%, reflecting a 90 basis point increase quarter-over-quarter and a 600 basis point increase year-over-year.

The company generated $12 million in net cash from operating activities, which marks a $92 million increase year-over-year. Operating expenses decreased by 30%, or $126 million, year-over-year.

In the quarter under review, Peloton achieved $116 million in Adjusted EBITDA and $11 million in Free Cash Flow, underscoring its ongoing efforts to enhance financial health.

CEO Appointed: The company has announced the appointment of Peter Stern as Peloton’s CEO and President, effective January 1, 2025. Stern, who currently serves as President of Ford Motor Company’s Ford Integrated Services and has held leadership roles at Apple and Time Warner Cable.

In connection with today’s announcement, Karen Boone will serve as sole Interim CEO and President through the end of the calendar year, and Chris Bruzzo will step down as Interim Co-CEO and President on November 1, 2024. They both will remain members of the Peloton Board.

Outlook: For the second quarter, the company expects revenues of $640 million to $660 million (estimate: $671.35 million). It projects adjusted EBITDA of $20 million to $30 million, reflecting a sequential decline of $91 million at the midpoint, mainly due to higher sales and marketing expenses as it increases media spending for the holiday season.

The company’s FY25 outlook for revenue remains unchanged at $2.400 billion to $2.500 billion ($2.463 billion). Total Gross Margin remains unchanged at 49.0%.

Price Action: PTON shares are trading higher by 29.5% to $8.61 at last check Thursday.

Photo Courtesy: Koshiro K On Shutterstock.com

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