Peloton Plunges After Missing On Everything, Slashing Outlook

Peloton shares are ugly in after-hours trading after missing top-line, gross margins, and revising its revenue outlook down drastically.

Peleton ended the reported quarter, with 2.49 million Connected Fitness Subscriptions, a gain of 87% from a year earlier, and revenue was up 6% at $805 million. All of which sounds good, but expectations were at $809 million.

Peloton forecasts that revenue will now be $4.4 billion to $4.8 billion (even at the top end that’s dramatically below the $5.4 billion average of analysts’ predictions).

“Although we are pleased to have delivered first quarter results that modestly exceeded our guidance, a softer than anticipated start to Q2 and challenged visibility into our near-term operating performance is leading us to recalibrate our fiscal year outlook.”

The company’s annual sales growth in the first quarter was 6%, compared to over 230% growth in last year’s first quarter.

For the year, gross margin will be 32%, notably lower than its earlier prediction of 34%.

Profitability was hit hardest as operating expenses grew 140% accounting for 77.3% of revenue, with sales and marketing expenses went up 148% from year earlier.

Worse still, the net loss for the quarter was $376 million, wider than predicted by analysts. The company has $924 million in cash and equivalents. It had negative operating cash flow of $561 million.

That is not sustainable and is mong the reasons why investors have sent PTON shares reeling after hours, down 25% to its lowest since August 2020…

The company put on a happy face:

“We remain convinced that the growth opportunity for Peloton is substantial and this informs our decision to prioritize accessibility and household acquisition over near-term profitability.”

But they are taking action:

“In response to our revised sales and margin outlook for FY 2022, we have identified material savings across our operating expenses, though some of these actions may take a quarter or two to show improvement.”

But the losses will continue and widen:

“Our current range estimate of Adjusted EBITDA loss for 2Q is $(325) million and $(350) million. Our revised outlook for full year FY 2022 is a range of $(425) million to $(475) million. We continue to expect to be adjusted EBITDA profitable for full year FY 2023.”

Finally, we note that in addition to sales slowing, the number of workouts per month per subscription has dropped from over 20 to 16.