Peloton first-quarter sales surged 232% despite supply constraints, shares down after hours

Peloton treadmill

Peloton has released its first-quarter earnings, and it was an incredible quarter as expected.

Peloton subscriptions grew 137% year-over-year to over 1.33 million, and total revenue grew 232% to $757.9 million. These revenue numbers are driven by strong demand for Bike, Bike+, and Tread+ sales. Peloton has once again reported subscriber churn under 1% for the quarter. Peloton also reported a gross margin of 39%. Peloton reported total revenue of $1 billion.

Peloton noted that member engagement eased somewhat from the previous quarter but remained well over year-over-year levels. In Q1, average workouts per subscriber per month was 20.7, compared to 11.7 in the previous period one year ago. Currently, new subscribers (April to now) tend to work out more than the older subscribers. Many of the new buys were active gym members whose routines were halted because of COVID-19 shuttering many gyms.

Peloton has issued guidance that it will end Q2 with 1.63 million subscribers, $1 billion in revenue, under 1% churn, and 39% gross margin.

Bike+ demand

Bike+ demand continues to outpace manufacturing, though. Peloton is working to meet demand, but it has exceeded its internal expectations. They’re increasing in capacity and moving to air shipping from overseas facilities despite the additional cost. The company is also growing its member support team to handle the increased customer support demand.

As we rapidly scale our organization to meet the extraordinary demand for our products, we realize that some of our members have faced extended delays associated with receiving our products or having support requests fulfilled.

CEO John Foley

Peloton noted that the original Peloton Bike is still the top-selling product, and is at its shortest wait time since April. Bike+ wait times will continue into Q2. Peloton is focused on getting its Bike wait time down as low as possible, and as it does, it will ramp up sales and marketing activities. The original bike can be purchased for only $49 using the Affirm financing plan.

Content focus

Content-wise, Peloton is focused on expanding to additional languages. When asked if new subscribers would mean more instructors, Peloton management noted that their existing model scales from 2,000 people in a class to 20,000 without needing to add instructors.

Certified pre-owned rollout

Peloton noted they’re excited about pre-owned bikes in the future, but they don’t have the inventory at the moment. They expected Bike+ to drive trade-ins, but it didn’t. They aren’t sure if they were sold locally or given to family, but they were expecting to grow the inventory in the short term.

Showroom strategy

Peloton currently has 105 retail stores, and they will expand in the future. They’re trying to cover large population centers, and it’s especially beneficial when releasing new products.

Peloton digital success

The subscription product that is “app-only” continues to be a great product for Peloton as a top of the funnel sales strategy, and they continue to believe it will continue to drive Peloton hardware sales. It is one of their top marketing objectives at the moment.

The entire earnings report can be found on Peloton’s website

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