peloton announced its fiscal third-quarter results on Thursday, showing that sales beat Wall Street expectations and that profits for the first three months of the year were by a narrow margin.
The company touted that better-than-expected equipment sales and subscription revenue contributed to higher sales and profitability, with free cash flow increasing by nearly 60%.
Peloton stock rose as much as 13% following the news, before ending the day up about 8%.
CEO Peter Stern told CNBC: “Our first priority for earnings is to report our financials. We feel like this was a pretty good quarter in terms of our strategic position.”
Here’s how the company performed for the quarter ended March 31 compared to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 6 cents vs. 7 cents expected Earnings: $630.9 million vs. $617.6 million expected
The company’s net income for the quarter was $26.4 million, or 6 cents per share, compared with a loss of $47.7 million, or 12 cents per share, in the year-ago period. Sales were $630.9 million, an increase of about 1% from $624 million in the same period last year.
Peloton said it expects total revenue to be between $2.42 billion and $2.44 billion for the year, raising the lower end of the guidance range it provided last quarter.
The company’s connected fitness subscription revenue was $202.9 million, down from $205.5 million in the year-ago quarter, but above expectations of $196 million, according to Street Accounts. Subscription revenue also exceeded expectations, increasing 2% year over year to $428 million.
However, the number of paid connected fitness members decreased from the previous year to 2.66 million.
“Some of the intermediaries that will be impacted this quarter and continue to be are selling additional equipment to our existing members,” Stern said on a conference call with analysts. “It won’t increase your subscriber count, but it will bring in revenue.”
The connected fitness company has been suffering from weak results and weak sales, and had previously predicted that the results would continue into this quarter. The company has been trying to revamp its product assortment and recently increased the prices of both its equipment and subscription plans.
Stern said Peloton felt the price change was appropriate.
“We’re very sensitive to the fact that people are feeling stressed in this economic environment and it’s impacting different people in really different ways,” Stern told CNBC. “That being said, we feel that the pricing changes we made in Q2 are well-timed. Since we previously made subscription pricing changes, we have added a tremendous amount of value over the subsequent three to four years.”
Peloton is also entering into new partnerships and trying new strategies to win back customers. Last month, Peloton announced a deal with. spotifySpotify Premium subscribers will have access to over 1,400 Peloton classes. The company also launched its first Bike and Tread product for high-traffic gym floors in March.
Stern added that the partnership with Spotify had been in the works for a “long time” and the company had already factored it into its revenue outlook. Peloton also doesn’t count Spotify users in its subscriber count.
“We’re really excited about our deal with Spotify. It allows us to reach Peloton members in more countries and also generates high-margin revenue (streams) for us,” Stern said.
Stern said on a conference call with analysts Thursday that Peloton now expects its full-year free cash flow exposure to be about $30 million from the tariffs, down from its previous estimate of $45 million.
“We’re very pleased to have achieved positive revenue growth in the third quarter. Based on the implicit guidance for the quarter, it’s unlikely to be sustained in the fourth quarter, but I think we’re at a stage now where we expect to see advances and setbacks as we get the ship back on track,” Stern said.
