Peloton Reports Q4 2022 Revenue Decline of 28 Percent, Plans to Break Even in Second Half 2023

Peloton reported fourth quarter 2022 revenue of $678.7 million, down 28 percent from fourth quarter 2021, according to financials released by the public company on Aug. 25. This quarter was the sixth consecutive quarter of declining revenue for Peloton, which is undergoing major changes to better position it financially after a surge in sales during the COVID-19 pandemic followed by declining sales as the pandemic wanes.

The company anticipates that its efforts should help it break even in the second half of fiscal year 2023. However, due to “broader macroeconomic uncertainties and the pace and number of change” the company is making to the business, the company will not provide guidance on revenue, gross margin, adjusted EBITDA and net subscriber additions beyond the current quarter at least through fiscal year 2023, Peloton said.

“Our Q1 outlook reflects near-term demand weakness associated with our recent hardware price increases as well as typical seasonal demand softness. We expect an improving gross margin, primarily due to the price increases for Bike+ and Tread that were implemented in mid-August,” the company said.

For fiscal year 2022, which ended June 30, 2022, Peloton reported revenue of $3.58 billion, down from $4.02 billion in fiscal year 2021 (ended June 30, 2021). Revenue included $2.19 billion from Connected Fitness products (which includes Precor) and $1.39 billion from subscriptions for fiscal year 2022 compared to $3.15 billion in connected fitness products and $872 million on subscriptions for fiscal year 2021.

For fourth quarter 2022, Connected Fitness revenue was $295.6 million, down 55 percent compared to fourth quarter 2021.  The primary driver of the year-over-year revenue decline was a reduction in consumer demand exiting the COVID-19 pandemic’s peak, the company said.

Subscription revenue of $383.1 million grew by 36 percent year-over-year, representing 56.4 percent of total company revenues. It was the first reported quarter where high-margin subscription revenues contributed the majority of Peloton’s total revenue.

In February, Barry McCarthy took over as CEO from John Foley, who founded Peloton. McCarthy has made multiple changes since then to better position the company financially. Most notably, he implemented two rounds of layoffs and moved production of Peloton equipment to third parties. The company lowered prices on some equipment in its third quarter to entice new users, but in August, it  raised prices on the Bike+ and Tread. On Aug. 24, the company said it would begin selling its original Bike, the Peloton Guide and accessories, such as branded cycling shoes, bike mat, weight, heart rate armband and other products, on Amazon with the possibility of working with other retailers in the future.  

Peloton also has been testing a rental option on its equipment that it calls Fitness as a Service (FaaS). So far, that program is driving increased traffic to the top of the company’s marketing funnel as it appeals to a younger, more value-conscious consumer, McCarthy wrote in a letter to shareholders on Aug. 25. Since June, about 20 percent of all first-generation Bikes have rented under this program, which is being tested in limited markets. This equates to more than 5,000 members paying $89 per month for a first generation Bike rental with all-access membership and a churn of under 3 percent, he wrote. Beginning in September, Peloton will expand marketing the program nationwide.

This month, Peloton conducted a limited 10-day test selling Peloton certified pre-owned Bike in the United States and Germany.

“The consumer response significantly outperformed our expectations,” McCarthy wrote. “In addition to FAAS, we plan to lean into this latest evolution of our business model, and I look forward to reporting back to you next quarter on our progress on both of these strategic programs.”

McCarthy wrote that naysayers would only see the negatives in the fourth quarter numbers. However, he said: “What I see is significant progress driving our comeback and Peloton’s long-term resilience. We still have work to do.”