Peloton Interactive Inc (NASDAQ:PTON) has delivered second-quarter revenue that beat forecasts, sending its shares higher in early New York trading.
The maker of connected exercise equipment reported a 29% quarter-over-quarter (QoQ) rise in total revenue to $792.7 million for the three months ended December 31, while total gross profit improved by 8% QoQ to $235 million.
The company’s subscription revenues continued to outpace equipment sales, rising by 22% from a year earlier. President and CEO Barry McCarthy, who took over a year ago in a management shake-up, aims to make the firm primarily a subscription-based company.
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"This past quarter we significantly outperformed our expectations for Connected Fitness subs, Connected Fitness Unit (CFU) orders, CFU deliveries, hardware revenue, subscription revenue, and total revenue, adjusted EBITDA, and free cash flow,” McCarthy said in a statement. “This was by far our best quarterly performance in my twelve months with Peloton.”
Year-over-year, revenue and gross profit declined 30% and 16% respectively from 2Q 2022. The company reported a reduced net loss of $335.4 million, while negative free cash flow (FCF) improved to $94.4 million from $246.3 million three months earlier. Stripping out the costs of paying suppliers to settle obligations for parts it doesn't need, the company noted that it generated a positive FCF of approximately $8 million.
“Stabilizing our cash flow was necessary for the survival of Peloton,” McCarthy added. “We won’t have the wind at our back every quarter, but we continue to do what’s necessary to ensure this trend continues. As a result, we once again control our own destiny. Our goal remains the same, reach free cash-flow breakeven by year-end FY23.”
The company has guided for 3Q revenue of $690 million to $715 million due to lower Connected Fitness unit sales following the holiday selling season and promotional activity eases, adding that macro-economic uncertainty is impacting consumer spending patterns and that near-term demand for Connected Fitness hardware is likely to remain challenging.
Its shares were trading about 20% higher at $15.69 by mid-morning in New York.
Contact the author at stephen.gunnion@proactiveinvestors.com