Peloton plans to relaunch the brand and introduce a new version of its Peloton app with a tiered membership structure, the company announced on May 4 as it reported that its third quarter 2023 revenue dropped by 22 percent.
Revenue for the third quarter 2023 (which for Peloton ended March 31) was $749 million, a drop of 22 percent from the $964.3 million it reported in the same period last year.
The company also reported a net loss for the ninth consecutive quarter with a net loss of $275.9 million. Still, that was an improvement from the same period last year when the net loss was $757.1 million.
Rebrand
The aim of the rebrand is to get people to think of all the company’s offerings, not just its bikes, according to Peloton CEO Barry McCarthy, who wrote in a letter to shareholders that since the company launched its first connected bike in 2013, Peloton's product offerings have expanded but its marketing has not.
In the third quarter, 57 percent of its customers' workouts did not involve the bike. Sixty-two percent of active members participated in strength training, yoga, meditation and other modalities. Beyond that, 38 percent of all Peloton workouts didn’t even involve Peloton hardware.
McCarthy played up the postives in his letter, noting that the company grew its connected fitness subscriptions by 5 percent, grew gross profit by 47 percent, decreased adjusted EBITDA loss year over year by $175 million, reduced its FCF loss year over year by $691 million, and increased its ending cash balance quarter over quarter.
Some of the company’s initiatives — including lowering the price on its bikes, selling pre-owned bikes and offering a rental program — is resonating with customers, according to McCarthy.
In fact, its rent-to-buy program and its pre-owned bike program make up 24 percent of hardware sales for the quarter.
The rent-to-buy program, which started in March 2022 as a way to attract customers who might otherwise not be able to afford a bike, now has 47,000 subscribers.
The pre-owned bike program, which launched in December, has been successful enough that the company may begin offering pre-owned treadmills and rowers.
The offerings have increased connected fitness subscribers to 3.1 million, a 5 percent increase compared to the same period last year. Subscriptions now account for 60 percent of the company’s total revenue.
Despite the positivity, McCarthy shared that historically, the company experiences a seasonal decline in subscriber growth in the fourth quarter as warmer summer months push people outside. He expects that decline to occur this year too.
“Notwithstanding the relaunch, Q4 will be among our most challenging from a growth perspective,” he wrote in the letter.
For the quarter, Peloton anticipates revenue will range between $630 million and $650 million, a six percent decrease compared to $678.7 million the same time last year.