Peloton Interactive Inc. (PTON) is a fitness company that provides an interactive fitness platform. It offers connected exercise equipment, including stationary bikes, treadmills, free weights, related fitness accessories and branded apparel.

Its equipment connects to the company’s online interactive platform and allows users to join live or on-demand fitness classes and track a range of fitness metrics. Peloton generates revenue from the sale of its fitness products and through membership fees for its digital interactive platform.

Peloton operates in a highly competitive environment where it competes with fitness clubs as well as companies that offer studio fitness classes, home fitness equipment and health and wellness apps. Its main competitors include Life Fitness, Equinox Group’s SoulCycle, NordicTrack, Echelon and Bowflex.

Peloton’s Financials

On May 4, 2023, Peloton released its Q3 2023 financial results fiscal year (FY), the three-month period ending March 31, 2023. The company reported a net loss of $276 million, a significant improvement over the $755 million net loss reported in the same quarter a year earlier. Revenues fell 22.3% for the quarter year-on-year (YOY) to $749 million.

The decline in the company’s sales is due to declining membership. In Q3 2022 the company had 7 million members, in Q3 2023 it had 6.7 million members. The Connected Fitness subscription segment saw cancellations increase from 2.96 million in Q2 2022 to 3.1 million in Q3 2023. Connected Fitness subscription additions also declined, from 195,000 in Q2 2022 to 74,000 in Q3 2023 2023. year-on-year sales fell by 45%, subscription sales increased by 15%.

Peloton’s business segments

Peloton has two reportable business segments: Connected Fitness Products and Subscription. It provides a breakdown of sales and gross profit for each of these segments.

Connected fitness products

The Connected Fitness Products segment generates revenue from the sale of Peloton’s various connected fitness products, including stationary bikes, treadmills and free weights. It also has revenue from related fitness accessories and branded apparel, supply and installation services, and extended warranty agreements.

Segment revenue fell 45% year-over-year to $324 million in Q3 2023. Gross profit improved from a loss of $67.9 million in Q3 2022 to a loss of $17.6 million in Q3 2023. Connected Fitness Segment Revenue Products contributed 43.2% to Peloton’s total revenue. Like his Gross Profit from this segment was unprofitable, it did not contribute to the total gross profit.

Subscription

The Subscription segment primarily generates revenue from monthly subscription fees to Peloton, an online interactive fitness platform that offers live and on-demand fitness classes and allows users to track various fitness metrics over time.

This segment’s revenue grew 14.8% year-over-year to $424.7 million in Q3 2023. Gross profit increased 14.16% compared to the previous quarter to $287.8 million. Subscription revenue accounts for about 56.7% of company-wide revenue, while subscription gross profit accounts for 100% of Peloton’s total gross profit.

The latest evolution of Peloton

In May 2023, Peloton re-launched, moving away from a domestic cycling company to showcase all it has to offer. She started a new one brand identity with a new branding campaign that saw the introduction of new membership levels and a new content feature called Peloton Gym.

In April 2023, Peloton and Hilton expanded their partnership to new regions including Puerto Rico, Germany, the United Kingdom, and Canada, which includes Hilton hotels with Peloton bikes to their hotels in those regions. This is an extension from the start of the partnership in October 2022.