Peloton Q12020 Review

Some Background: Some of Peloton Revenue Streams

Hardware Sales:

• Bikes starting at aound $2,245
• A treadmill starting at $4,295
• Fitness Accessories

Subscriptions Through the Peloton App:

• Peloton's Bread & Butter All-Access Membership for $39
• As well as a limited Digital Membership for $12.99

Earnings from Revenue Streams

Total Revenue grew 66% Year-Over-Year coming in at $524.6 million. Gross Margins were 46.8%. Connected Fitness (All-Acess Subscription Plan) Gross Margin was 45.3% representing 63.6% of Gross Margin. (That Bread & Butter I mentioned earlier).

Net Loss was $(55.6 million)

• EBITDA Loss was $23.5 million.
• $304.2 million total in operating expenses. $154.8 of that in marketing, and another $126.9 million in GA Costs(Lawsuit with Flywheel which Peloton won).

Consumer Data

2.6 million total members. Some of these are on 90-day Free Trials. Peloton hopes they become All-Access Subscription Plan Members

• All-Access Connect Fitness Subscribers grew 94% Year-Over-Year to 886,100
• Limited Access Digital membership increased 64% to 176,000

Looking Ahead

1.04 to 1.05 million subscribers expected to be added by the end of 2020. Representing 104% growth Year-Over-Year for the period ending in Q2 of 2020. $500 to $520 million in total revenue for the halfway point in 2020. A 128% growth rate.

Tailwinds

• Covid-19 is accelerating the Connected Fitness Trend - OnePeloton are the leaders in the high-end fitness space. They're establishing great dominance in the market while the rest of boutique spaces remain closed over no fault of their own.
• There's greater demand than supply of Peloton Equipment. Infact Peloton paused filling Treadmill Orders to focus the outpacing demand for bikes. Acquisition of bike maker Tonic will see them move quickly to meet this demand. Peloton is already position it's supply chain for Holiday Shopping Season

Some of the challenges that might negatively affect Peloton's profit margins

• Increased Air Freight Costs to deliver bikes from Taiwan Manufacturing Factor. Increased operating cost for local delivery to customers (Hazard Pay, etc)
• It's not too apparent who Peloton's competitors are right now, but this can change very quickly. For example if  Nike or Apple who already have a Connected Fitness Apparatus join this space. What would that mean for Peloton? There's also Nordictrak, however with Peloton first to market they retain an advantage here
• Lawsuits to ward off competition. If they continue they'll eat into the company's bottom line. There's one with Echelon Fit (another stationary bike maker).

Follow Up Questions for next earnings call

• How many of the 886,100 subscribers from Q12020 became Connected Fitness or Digital Access Members?
• International Growth? How's that looking. How's performance in Germany, etc.
• Some new products in the coming future? A $1,000 version of the Peloton bike? A lower entry price point for some consumers not willing to shell out $2,245

Takeaways

There's a lot of runway for Peloton. 2.7 million current users with an estimated and growing addressable market of over 14 million people.
Peloton added close to 900,000 Subscribers in the last quarter. If OnePeloton can retain even a fraction of the new users into there Connected Fitness Plans, they're adding...$$$$

The Company enjoys healthy margins (Double/Tripple digit growth in revenues). They can outspend competition in order to secure more users.

• Peloton paused it's Marketing Campaign mid march. Still they added a tremendous amount of Subscribers via Word of mouth. Brand Power!
• Thinking about Fitness as a Community. The Peloton App is adding a tags feature that allows members of Peloton Community to engage with each other based on their interests. Similar to how you can use a common hashtag to see people's activity. Peloton is hoping to build communities of similar interests in the same way
• An important question for Investors, is what do we need to see from Peloton in order crown Pelotonas a Key player in fitness space.

Some Key buzzword(s) that we're used over aver over again:

#ConnectedFitness

Terms: Some terms used & how they affect Peloton

• Gross Margin: Peloton's Revenue minus Cost of Goods excluding Salaries, & Other Administrative Costs. Gross Margins above 45% across the board are stellar.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, & Amortization. Peloton being a new company has a lot of cost associated with research and development to introduce new products to market. Hence the difference between the $524.6 million & $23.6 million$ values.
• GA Costs: General & Administrative Costs. 126.9 in Q12020. Up 79.9 million from the same period in 2019. As mentioned earlier. Lawsuits reponsible. Peloton has to protect it's patent technology. Anybody can build a bike with and put a screen on it.