Last week, Peloton closed the books on its first-ever profitable quarter, reporting a 172% sales surge. "Fueled in part by the challenges associated with COVID-19," the company wrote in a letter to shareholders, "member engagement reached new highs, with 164 million Connected Fitness Subscription workouts completed in FY 2020."
The exercise equipment company said it ended the quarter with over 1 million subscribers, a 113% jump from 2019, bringing its total membership to just over 3.1 million. Its gross margins grew to 47.6%, and its revenue soared 24% above the fiscal year projection it provided following its IPO.
Peloton's growth doesn't rely on gyms remaining shut, CFO Jill Woodworth told Barron's. "But obviously [...] people are now realizing that home is a more convenient place to exercise, and a better value," she said. "I do think that this has shed a light on a new way to approach fitness that a lot of other people wouldn't have considered before."
Nonetheless, Peloton doesn't "want, or need, gyms to die" in order to continue on its pathway of sustained growth. And even as its valuation near-tripled, the company allocated no media spend for advertising in the U.S.
As CFO, Woodworth said Peloton's total recorded workouts, reaching almost 77 million in the quarter, is the key performance metric (KPI) of which she is most proud.
"That's 25 workouts per connected fitness subscription on average per month," she said. "That is the thing we are myopically focused on, because that leads to low churn, great word of mouth and, frankly, it's what I believe has changed this category of fitness, because there's finally something that works."
Woodworth acknowledges the outsize impact of working from home en masse, combined with continued shelter-in-place mandates as a definite driver of recent engagement, but also credits the company's bombshell quarter to its improvements across non-bike formats, like strength training and yoga, and expanded accessibility via Roku, Fire TV, and Android.
Peloton, which garnered its original acclaim for its cardio machines, a stationary bike and treadmill, is investing a great deal of its future on delving into strength training. Woodworth says the expansion won't require much new hardware nor a significant strategic pivot. The company's "connected fitness subscribers" pay $39 per month to sync workout classes to their Peloton equipment, CNBC wrote. And Peloton announced its launch of two new products: a lower-priced treadmill and a higher-priced stationary bike, both of which analysts expect will further add to its membership numbers.
"Without going into detail too much on the strategy, I think there's a lot we can do around software and content to really grow interest in strength," she said. "The magic of what we've done with the bike [is] the merging of hardware, software, and content. And I do think, over time, there are innovations we can make to try to replicate that success [...] in the strength category."
Though it's leading the pack, Peloton is not alone in its success. In its most recent quarter, competing exercise equipment manufacturer Nautilus saw net sales jump 94%, to $114 million, it said in an August earnings report.
Franchise gyms, whose membership numbers once trounced those of Peloton, have now found themselves in the opposite predicament. In its most recent quarter, Planet Fitness reported a 77.9% decrease in total revenue from the prior year period.
"The near-term operating environment is likely to remain volatile and negatively affect our near-term revenue and profitability," Planet Fitness CEO Chris Rondeau said in the company's earnings report last month.
