Peloton(US:PTON)2025-05-08 20:04Part I. Financial Information Financial Statements Peloton reported total revenue of $1.88 billion for the nine months ended March 31, 2025, with a reduced net loss of $140.5 million and positive operating cash flow of $215.9 million Condensed Consolidated Balance Sheets Peloton's balance sheet as of March 31, 2025, shows total assets of $2.06 billion and total liabilities of $2.56 billion, with increased cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (as of March 31, 2025 vs. June 30, 2024) | Balance Sheet Item | March 31, 2025 (in millions) | June 30, 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $914.3 | $697.6 | +$216.7 | | Inventories, net | $213.5 | $329.7 | -$116.2 | | Total current assets | $1,340.3 | $1,266.0 | +$74.3 | | Total assets | $2,064.8 | $2,185.2 | -$120.4 | | Liabilities & Stockholders' Deficit | | | | | Total current liabilities | $811.7 | $685.2 | +$126.5 | | Total liabilities | $2,556.2 | $2,704.3 | -$148.1 | | Total stockholders' deficit | ($491.3) | ($519.1) | +$27.8 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q3 FY2025 saw total revenue decline to $624.0 million, but net loss significantly narrowed to $47.7 million due to improved gross profit and cost reductions Statement of Operations Summary (in millions, except per share data) | Metric | Q3 FY2025 | Q3 FY2024 | 9 Months FY2025 | 9 Months FY2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $624.0 | $717.7 | $1,883.9 | $2,056.9 | | Gross Profit | $318.1 | $309.7 | $940.2 | $894.5 | | Loss from Operations | ($32.4) | ($146.2) | ($65.8) | ($465.7) | | Net Loss | ($47.7) | ($167.3) | ($140.5) | ($521.4) | | Net Loss per Share | ($0.12) | ($0.45) | ($0.36) | ($1.44) | Condensed Consolidated Statements of Cash Flows Operating cash flow significantly improved to $215.9 million for the nine months ended March 31, 2025, driven by reduced net loss and working capital changes Cash Flow Summary for the Nine Months Ended March 31 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $215.9 | ($98.8) | | Net cash (used in) provided by investing activities | ($0.4) | $33.5 | | Net cash provided by financing activities | $2.1 | $29.0 | | Net change in cash, cash equivalents, and restricted cash | $211.1 | ($36.7) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the 2024 Restructuring Plan, significant debt refinancing, and segment performance, including improved Connected Fitness gross profit - The company's revenue is primarily generated from recurring Subscription revenue and the sale of its Connected Fitness Products28 - In April 2024, the company approved a new restructuring plan (the "2024 Restructuring Plan") to reduce global headcount and retail locations, aiming for sustained positive free cash flow. The company expects the plan to be substantially complete by the end of fiscal 202563 - The company has two reportable segments: Connected Fitness Products and Subscription, with the CODM reviewing revenue and gross profit for both160 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports progress on FY2025 goals, including a 23% reduction in operating expenses, positive free cash flow, and significant cost savings from restructuring efforts - In Q3 FY2025, operating expenses decreased by 23% year-over-year, and the company generated over $90 million in GAAP Net Cash Provided by Operating Activities and non-GAAP Free Cash Flow170 - The company is tracking ahead of its target to achieve $200 million of run-rate cost savings by the end of fiscal year 2025 through its restructuring efforts179182 Key Operational Metrics (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Ending Paid Connected Fitness Subscriptions | 2,880,176 | 3,051,451 | | Average Net Monthly Paid Connected Fitness Subscription Churn | 1.2% | 1.2% | | Ending Paid App Subscriptions | 572,775 | 675,190 | | Average Monthly Paid App Subscription Churn | 8.1% | 9.0% | | Adjusted EBITDA (in millions) | $89.4 | $5.8 | | Free Cash Flow (in millions) | $94.7 | $8.6 | Results of Operations Q3 FY2025 revenue declined 13.1% to $624.0 million, but gross profit increased, and operating expenses significantly decreased, narrowing the loss from operations Revenue by Segment (Q3 FY2025 vs Q3 FY2024) | Segment | Q3 FY2025 (in millions) | Q3 FY2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Connected Fitness Products | $205.5 | $279.9 | (26.6)% | | Subscription | $418.5 | $437.8 | (4.4)% | | Total Revenue | $624.0 | $717.7 | (13.1)% | Gross Profit & Margin by Segment (Q3 FY2025 vs Q3 FY2024) | Segment | Q3 FY2025 Gross Profit (in millions) | Q3 FY2024 Gross Profit (in millions) | Q3 FY2025 Gross Margin | Q3 FY2024 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Connected Fitness Products | $29.3 | $11.6 | 14.3% | 4.2% | | Subscription | $288.8 | $298.1 | 69.0% | 68.1% | - The decrease in Sales and Marketing expense for Q3 FY2025 was primarily driven by a $51.8 million reduction in acquisition, brand, and creative marketing spend233 Liquidity and Capital Resources Peloton held $914.3 million in cash as of March 31, 2025, with liquidity supported by recent debt refinancing and sufficient for the next 12 months - As of March 31, 2025, the company had cash and cash equivalents of approximately $914.3 million269 - In May 2024, the company refinanced its debt by issuing $350.0 million of 5.50% Convertible Senior Notes due 2029 and entering into a new $1.0 billion term loan facility due 2029, using proceeds to repurchase $801.0 million of 0.00% Convertible Senior Notes due 2026274281284 Contractual Obligations as of March 31, 2025 (in millions) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Lease obligations | $636.8 | $94.2 | $153.8 | $109.1 | $279.7 | | Minimum guarantees | $123.2 | $107.5 | $15.5 | $0.3 | — | | Convertible senior notes | $549.0 | $199.0 | — | $350.0 | — | | Term loan | $992.5 | $10.0 | $20.0 | $962.5 | — | | Total | $2,376.5 | $458.3 | $215.6 | $1,422.9 | $279.7 | Quantitative and Qualitative Disclosures About Market Risk Peloton faces market risks from interest rate fluctuations, foreign currency exposure in international operations, and inflationary pressures on supply chain and labor costs - The company is exposed to interest rate changes primarily through its Third Amended and Restated Credit Agreement316 - Foreign currency risk exists as international sales are denominated in foreign currencies, and some manufacturing costs are tied to the Taiwanese dollar, with potential use of derivative instruments for hedging317318 - Inflationary conditions are causing pressure on supply chain, logistics, materials, and labor costs, potentially impacting the company's results of operations and gross margins320 Controls and Procedures As of March 31, 2025, disclosure controls and procedures were deemed ineffective due to material weaknesses in inventory and Precor's control environment - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2025322 - The ineffectiveness is due to two material weaknesses: one related to controls around inventory and another related to the business process control environment at the Precor subsidiary323326 - Management is actively executing remediation plans for both material weaknesses, including enhancing inventory count processes and improving controls at Precor, but these efforts are still ongoing324329330 Part II. Other Information Legal Proceedings The company is involved in various legal and regulatory proceedings, with detailed information available in Note 8 of the financial statements - This section directs readers to Note 8, "Commitments and Contingencies," for a detailed discussion of ongoing legal proceedings335 Risk Factors No material changes have been made to the risk factors previously disclosed in the company's most recent Form 10-K - No material changes have been made to the risk factors disclosed in the company's most recent Form 10-K336 Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter341 Exhibits This section lists exhibits filed with the Form 10-Q, including required certifications from the CEO and CFO, and Inline XBRL documents - Lists required filings, including CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files342