|The Peloton bike is a high-tech stationary bike with a removable HD touchscreen. / Photo by MYDAYcontent via Shutterstock|
Nationwide lockdowns have caused traditional fitness studious and gyms to shut their doors, leaving many people looking for at-home workout alternatives. American exercise equipment and media company Peloton has enabled them to capitalize on the sudden change of consumer behavior.
A new class of fitness
Peloton Interactive Inc. announced that its quarterly revenue jumped 66% and its paid digital subscribers also rose 64% after the pandemic encouraged people to work out while under quarantine. The fitness equipment maker likewise increased its forecast because of the continued demand for their products. As a result, the company’s shares increased by more than 9% in the extended trading, reports Bloomberg.
Strong demand for an exercise bike
The company said that it was able to generate $524.6 million in sales and their fitness subscribers grew to more than 886,000, beating the estimates of analysts. In its letter to the shareholders, the company wrote that the revenue for their Connected Fitness Product exceeded their expectations in all geographies due to the strong demand for their exercise bike.
The Peloton bike is a high-tech stationary bike with a removable HD touchscreen. The purpose of the screen is to allow users to access live-stream and on-demand content while cycling indoors.
Annabel Davidson is one of the many people who panic-bought the Peloton exercise bike for the lockdown. She shared that as a cardio-phobe, she was alarmed that the lockdown would harm her body so she had a Peloton bike delivered in her home in London. She never had a spin class before but now admits enjoying seven Peloton sessions per week.
Featured in the New York Times was the story of triathlete Lauren Allbright, 39, who also panic-bought a Peloton bike. “Working out daily is huge for our mental health,” she said.
Davidson and Allbright are among the people who helped boost Peloton’s sales. The company also expects an increase of connected fitness subscribers of 1.04 million to 1.05 million and it increased its fiscal 2020 revenue guidance to a range of $1.72 billion.
In the middle of a debate on whether the firm could maintain a sustainable business selling pricey exercise bikes and expensive online workout classes, Peloton went public. However, its stocks dropped 11% after its Initial Public Offering (IPO) and investors quickly pedaled away.
The nationwide lockdown has helped quell the dissenters as Peloton’s shares closed at $38.03 record, a gain of 34% this year. The company is also projecting fiscal-year earnings this 2020 to be around $30 million to $40 million, excluding amortization, depreciation, tax, interest, and other items.
Peloton’s Chief Executive Officer John Foley said in a conference call that the company is now working on other new products, such as a cheaper treadmill, to offer to its customers. Bloomberg has also reported that the company plans to introduce a rowing machine. Foley added that they are re-thinking the timeline in introducing its new products because of the pandemic.
When Peloton’s stock dropped 11% after IPO, Foley was puzzled. “It’s a head-scratcher,” he said. He said he can’t explain since they enjoyed a 103% top-line growth and believe that they’re going to achieve profitability but they traded down. He thinks that macroeconomic forces were somehow to blame as well as the general confusion on how to evaluate the business.
Yet, the market sentiment is different today as coronavirus restrictions kept gyms closed. The shares of Peloton reached more than 6% in April after the company announced that it had the largest fitness class ever. The company stocks are also up more than 13% since January 1. Its business model is among the few that have thrived while the rest of the society was shut down to limit the spread of the Covid-19.
In the company’s Form S-1 Registration Statement filed to the US Securities and Exchange Commission, listed owners of Peloton include Tiger Global (46,721,437 ownership Class B Shares), True Ventures (28,369,274), Fidelity (15,926,796), TCV (15,741,169), John Foley – Founder and CEO (15,169,568), William Lynch – President (7,502,716), and Jill Woodworth – CFO (3,500,000). This means that Foley’s share is equivalent to 6.2% of total shares while Lynch 3.1%.
On March 15, Peloton also closed its retail stores to the public but it continued to produce live content. Then, it temporarily paused its live production after an employee reportedly tested positive for Covid-19. The company then encouraged its instructors to just stream live from their homes.
Financial services and investment company Wedbush’s Equity Research Analyst James Hardiman said that Peloton will emerge from the pandemic as a much stronger company and with greater demand. Even in the Q2 release of the company earnings, Peloton already has more than two million members at the end of its second fiscal quarter on December 31 and this quarterly revenue will grow even more to 77%. Representatives of the company declined to comment about their member growth since the last disclosure.
|Peloton is indeed taking the fitness world by storm. / Photo by ArtRoms via Shutterstock|
Peloton Digital App
One of the main components of the company’s success during quarantine is its digital app, which houses the workout content that users need. It provides remote access to on-demand and live classes in various formats. The app also comes with a diverse and established library, making it an obvious choice for people looking for home workout options while quarantining.
The company also responded to the nationwide stay-at-home order by extending their free trial from one month to 90 days to attract more users. As of March 2020, Peloton home fitness app downloads have reached 400,000, with a peak on April 16th. This is according to mobile app store marketing intelligence platform Sensor Tower.
Meanwhile, data compiled by business information platform Crunchbase shows that Peloton bike users are more engaged with connected subscription services. In 2017, there were about 108,000 subscribers who logged an average of 7.5 workouts per month. In 2018, subscribers reached 246,000 and an average of 8.4 workouts per month. In 2019, Peloton’s subscriber base reached 511,000 and logged an average of 11.5 workouts per month.
As the company grows, it also faces growing competition from legacy fitness firms and startups. Sales of Hydrow, for instance, were four times higher last month than in January, which is usually its peak month as it eflects consumers' New Year’s resolution to stay healthy and fit.
Peloton is indeed taking the fitness world by storm. The stay-at-home policy seems to have benefited the company.