An earlier version of this report incorrectly stated consensus expectations for Peloton’s loss.
Peloton Interactive Inc. posted a $335.4 million loss Wednesdays for its latest quarter, a large sum but one that indicated continued progress from the connected-fitness company’s cash-burning peaks.
The company’s fiscal second-quarter net loss, which equated to 98 a share on a GAAP basis, was better than the $439.4 million loss seen in the year-earlier period. Analysts tracked by FactSet were anticipating 66 cents a share in GAAP losses.
Analysts expect continued losses but also further improvement from here, projecting a $167 million loss for Peloton
PTON,
in the March quarter.
On the basis of adjusted earnings before interest, taxes, depreciation, and amortization, Peloton lost $122 million, compared with $267 million a year before. The FactSet consensus was for $108 million.
“If you’ve been wondering whether or not Peloton can make an epic comeback, this quarter’s results show the changes we’re making are working,” Chief Executive Barry McCarthy said in a letter to shareholders.
He highlighted that Peloton posted negative free-cash flow of $94 million, compared with $747 million nine months prior. Free-cash flow would have been slightly positive if not for “the costs of paying suppliers to settle obligations for parts we don’t need,” he added.
The FactSet consensus was for $149 million in negative free-cash flow.
Shares were up more than 5% in premarket trading Wednesday.
While Peloton’s revenue is still declining, the company posted a sizable beat relative to analyst expectations. December-quarter revenue dropped to $793 million from $1.13 billion a year before, while analysts were modeling $710 million.
“Despite seasonally strong hardware sales, for the third consecutive quarter, we generated more revenue from subscriptions than we did from hardware sales. This trend is gross margin accretive because subscription gross margins significantly exceed hardware gross margins,” he wrote.
A continuation of this trend would signal “structural shift” toward gross-margin progress, according to McCarthy.
On the product side, new initiatives around strategic positioning and distribution “have been important contributors to the turnaround of our business,” he noted.
The company had 6.7 million members in its latest quarter, along with 3.033 million ending connected fitness subscriptions. Peloton had 2.973 million ending connected fitness subscribers in the September quarter. The FactSet consensus for the most recent period was 3.003 million.
For the fiscal third quarter, Peloton executives anticipate $690 million to $715 million in total revenue, whereas analysts were looking for $690 million. Management also projects a loss on the basis of adjusted Ebitda of $35 million to $50 million, while the FactSet consensus called for $44 million.
This post was originally published on Market Watch
